The introduction of Australia’s Open Banking regulations next year could pose a threat to traditional banks by allowing consumers to access their data and move it to new competitors more easily. But trust remains a key issue for insurgents and incumbents alike.
According to a survey of more than 2,000 Australians conducted by Accenture, 66 per cent of respondents say they are not willing to share financial data with non-banking third parties.
Younger customers were more receptive to the idea; Gen Z and Millennials are 4.5 times more likely (31 per cent) than older population (7 per cent) to be aware and willing to share their banking data.
The results are in line with a similar survey Accenture conducted last year with UK consumers that showed 69 per cent of respondents would not share their bank account information with third parties.
The new Consumer Data Right (CDR), which is currently being developed, will give Australians access to their banking, energy, phone and internet transaction data. Banking will be the first sector to adopt the CDR, where it will be known as Open Banking.
The new rules will allow consumers to grant third parties — such as technology providers, fintechs, telecommunications companies, retailers and other corporates — access to their financial data, enabling consumers to compare products and services more easily.
But consumer awareness of the changes is low. According to Accenture, 83 per cent of consumers not aware or not sure about change in rules to allow for sharing of banking data.
Consumers won’t be obligated to share their data if they chose not to. According to a spokesperson for the ACCC: “Taking banking as an example, customers may still go on banking the same way without ever participating in Open Banking if they do not wish to.”
But the news isn’t great for banks either, with trust taking a beating as a result of the ongoing Royal Commission. According to the Accenture survey, two-thirds (68 per cent) of consumers are concerned with how banks manage their money and financial data.
Despite that, 84 per cent would trust only their own bank with their financial data even if a third-party provider were to offer added benefits to secure access to the information, compared with 59 per cent of British consumers who said the same. Just 8 per cent said would trust startup and 6 per cent would trust large tech company with their financial data.
“Tech firms, online retailers and fintechs currently face an uphill battle competing with Australia’s traditional banks for customers due to the banks’ stronger trust connection with their clients,” A spokesperson for Accenture Banking said.
“But an emerging generation of consumers is much more receptive to Open Banking, and as their understanding and awareness of Open Banking innovations grow, it could have a big impact on the financial sector. Traditional banks cannot afford to rest on their laurels, as these new rules open the door to new competitors targeting young Australians.”
According to the study, Australian consumers’ biggest concern with Open Banking centers around the security and privacy of their financial data, with nearly two-thirds (64 per cent) of respondents citing that as the main obstacle to sharing their financial data with third parties.
The majority (53 per cent) of respondents also said they don’t understand the potential benefits of Open Banking enough to grant third-party providers access to their data, while almost half (47 per cent) said they don’t think Open Banking will deliver enough value to change their banking behaviour.