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Australian banks are following consumers into the digital world, dedicating 45% to 48% of their media budgets towards digital media in 2017 and being one of the biggest contributors to the internet advertising market.

With some businesses – such as Volt Bank – depending on digital experiences exclusively, similar companies are popping up just in time for Australia’s open banking regime. However, not all existing banks and financial technology (fintech) companies are prepared for the changes.

Here’s how the Australian financial services landscape is changing and how these changes can help you provide 1:1 customer experiences:
 

Banking in 2018

 

Consumers are flocking to digital financial services, with Roy Morgan and Avaya data respectively showing that 8.3 million Australians were using online banking in the six months up to June 2017, and 34% of Australians are frequently using mobile banking apps.

While the big four banks still dominate Australia’s banking sector, controlling just over 80% of all owner occupier home loans and 85% of all investor housing loans, Australia has more than 100 authorised deposit-taking institutions offering banking services. In order to stay competitive in this increasing digital world, banks need greater digital presences and give customers control of and access to their own data.
 

 

Trading data for value

 

The financial services industry is in a great position to lead the way with technology adoption and digital transformation, due to its available capital, competitiveness and the demand to meet customer expectations.

In a recent address to the Competition in Banking Conference at the Melbourne Business School, Australian Banking Association CEO Anna Bligh discussed the new changes to legislation around consumer data and the value this gives to banks and customers.

“In the second half of this year, the Treasurer will bring a deal before Parliament that will confer a data right on Australian consumers for the first time,” Bligh said.

Since then, the Parliament has passed the review into open banking, giving consumers ownership over their banking data, the ability to instruct their banks to share their information via a dedicated API, and safely transfer their data to other financial institutions, enabling them to find better deals on interest rates, mortgage rates and other products.

These changes will take effect from July next year.

“When you think of it, customer transaction data and data about the products they are using is an incredibly rich source of information. It is a source of information that has long been regarded as the commercial property of the bank and banks themselves have seen that commercial property as competitively significant,” Bligh said.

In terms of fintech, this freedom of data gives developers an opportunity to provide a smoother customer experience, while spurring competition and innovation between banks.

“Australians are very multi-banking users when you look at global comparisons. They might have what they consider their main bank, where their savings account or their mortgage is, but they are very likely to have a credit card product from another bank or a personal loan from a third or fourth bank,” Bligh explained at the event.

“It doesn't take much to think about how open data could be used by disruptor companies or app developers to allow you to quickly aggregate all your accounts in the one place and use that to aggregate tax data, to use that as a way of effectively having one banking portal, even though you might have several banking services.”

This will also give customers the ability to test their own eligibility for special offers or credit from providers without having to change banks.

The financial services industry will need a multi-pronged strategy to allow for continued innovation while responding to regulatory uncertainty stemming from the Royal Commission and client best interest.
 

What does this new data access mean for banks?

 

Consumer data helps businesses create personalised offerings and experiences for customers, based on the latter’s relationship with the primary provider and third parties, where access has been granted.

But some industries have barriers to overcome to do this well. Many retail purchases are made in physical stores and aren’t tied to a known customer unless they’re using a loyalty card. Consumer-packaged goods brands have it even harder – most of their customer relationships are indirect. Automotive companies, on the other hand, may build a personal relationship at the point of purchase, but it’s usually not a long-term relationship.

This presents a unique advantage for banks – they have access to rich data sets that allow digital segmentation of customers – by products, spending tiers, location, and duration of relationship.  

According to Capgemini Consulting’s Big Data Alchemy: How Can Banks Maximise the Value of Their Customer Data? report, the top impediment to using data for decision-making is that it is often stored in silos and is difficult for advertisers to access.

Creating an open flow of data will help financial institutions develop new value for customers. Compelling experiences, underpinned by open transactions and coupled with analytics, drive well-timed, targeted messaging and alerts that guide and assist customers in their financial lives.

Currently, businesses such as Google Customer Match and Facebook Custom Audiences allow advertisers to upload SHA-256 hashed copies (a one-way transformation) of customers’ personally identifiable information (PII), including email addresses and phone numbers, so they can make advertising part of the customer journey without the information ever leaving their company.

However, it also presents new challenges for data security. Protecting customers’ personal information is not just the law in this highly-regulated industry but a critical component of maintaining customer trust and relationships.

As a result, policymakers have to decide who should have access to open data, what accreditation they should have (if any), how data sharing is in the customer’s best interest and how to compensate customers in the event of a data breach.

“The government has resolved that you can only receive this data if you are a participant and providing the opportunity to your customers to put their data on to the same platform,” Bligh added.

Download the Restoring trust in financial services in the digital era report and join us at Salesforce Financial Services Basecamp event in Sydney on October 25th to start blazing a trail in financial services.