As open banking and the Consumer Data Right (CDR) passed its 4th anniversary in Australia during July of this year, the report card isn’t looking great. It’s fair to say that CDR is yet to have a significant impact on how banks, consumers, and small businesses approach, promote and consume financial services.
Despite significant investment from both the Government, Authorised Deposit-taking Institution’s (ADI’s) and FinTechs, we seem to be caught in the no-man’s land between ambition, tradition, and stagnation.
It was always going to be a bumpy road of course. Asking banks to give back something (data) they’ve always regarded as their own to provide their existing customers with greater choice and increase market competition, was never going to be straight forward. It seems like the conversation however is now stuck in the tactical details rather than the strategic vision.
Yes, we need to improve the consent process, yes, we need to ensure data quality is maintained and yes, we need to resolve the other debates that continue to rage across the ecosystem. But most importantly, don’t we also need to remember why we set sail on this journey in the first place?
If you dust off Scott Farrells’ original report Review into Open Banking published way back in 2017, you only have to re-read the first page to remind yourself of the initial intention. The first of the Four Simple Principles reads:
“Open Banking should be customer focused. If should be for the customer, be about the customer and be seen from the customer’s perspective.“
What is clear is that consumers don’t wake up in the morning and declare “I must remember to use my consumer data right today”. They do however wake up and say, “I want to understand how to improve my financial position” or “I want a loan to purchase a car” or “I want to avoid having to go into a hardship program” and many other outcome focused goals, needs and wants.
If CDR was truly viewed form the customers perspective by those involved and centred on solving or improving genuine and valuable use cases, we may be seeing a different outcome.
When there’s a life-based reason to consume financial services and that service can be delivered accurately, quickly and with greater personalisation and less friction, we would see the adoption of CDR, as a facilitator of these new experiences skyrocket.
This needs a mindset shift however from the current focus on fixing the challenges to placing renewed attention and effort on the customer value and benefits that effective data sharing can enable. This means moving away from just the intricacies of the data sharing process itself. That’s just a means to an end.
And it’s not just the consumer that stands to benefit. To take the classic lending use case, the efficient use of consented data not only improves the customer experience, but when coupled with intelligent insights it also enables the lender to significantly lower their cost of origination, reduce their time to decision and make more accurate customer assessments. Therefore, writing more loans while maintaining their compliance requirements.
Rebooting the CDR dialogue to a use case-based approach is not only important for the success of the initiative, but it also fits the current position within the economic cycle Australia and many other countries are in. The need for better, more efficient solutions in a time of low housing affordability, cost of living pressures and high interest rates is a perfect storm for CDR to show its worth.
Welcome to CDR 2.0