By Clancy Yeates
Would you be prepared to give a little-known business access to your most sensitive financial data, if it meant getting a better deal on your home loan?
This type of question is set to become increasingly relevant in the coming years, as the big data revolution joins forces with a push for greater competition in banking.
Data is one of the most valuable assets in the financial world, and there’s a clear trend towards policies that put more of this value back into the hands of consumers, rather than large corporations.
The only catch is that often, the way for consumers to squeeze more value from their data it to securely “share” it with a rival bank or financial technology or “fintech” firm. Treasurer Scott Morrison is even pushing for an government-mandated system to allow such sharing, known as “open banking” (more on that later).
But how keen will consumers be to start doing their banking with a new range of financial businesses that most of us have probably never heard of?
New survey results from US technology firm Oracle suggest Australians are less open, compared with consumers in other large economies, to engaging with the fintech revolution.
The survey, released on Wednesday, shows only 6.25 per cent of Australians regularly use a “fintech” bank, compared with 10 per cent in the United States, 12 per cent in Britain, and 40.5 per cent in India.
Despite a growing number of digital “robo advisers”, 9.75 per cent of local respondents said they used fintech wealth advisers services frequently, compared with 16 per cent in Britain and 21.5 per cent in United States.
It is a similar story with peer-to-peer lenders – businesses trying to undercut banks by allowing people with savings to lend out this money directly to others via online platforms.
Now, there may be perfectly good reasons for these trends.
Our major banks are especially dominant, with their own array of sophisticated digitial apps. We have been slower in developing industries like P2P lending than the US and Britain. Countries such as China and India have also “leapfrogged” wealthier nations in their embrace of digital finance apps, so it’s not surprising people there are more open to fintech than Australians.
Even so, the survey also found Australians were less likely to even be interested in the new wave of financial challengers. All up, 59 per cent of Australians were open to using digital banking platforms, putting us 10th out of 13 countries surveyed.
To be sure, different evidence suggests Australians are indeed open to new types of technology, including in banking.
We have been among the world’s most enthusiastic adopters of tap and go payments, while other surveys have shown young people are much less loyal to their banks.
Oracle’s data did show that 75 per cent of Australians between the 20 and 36 were using or open to using digital banking products, which was higher than the global average.
But the overall findings point to a looming challenge facing the fintech revolution.
If customers are to truly benefit from policies promoting competition from fintech firms, people will need to be willing to engage with these businesses, not just the established banks.
A system known as “open banking” – the details of which are still be finalised – will set up infrastructure to allow people to do exactly this. Under Morrison’s plan, consumers would be able to securely “share” their financial records – such as all their recent bank transactions – with a fintech rival who may be able to offer them better terms than their bank.
The rationale is that this unleash a spate of new apps and other services to put consumers into better-value products, and force the big four to compete more sharply. ScoMo has also made it easier for start-up banks to attract capital, test their products, and get a banking licence.
These are all positive moves. But for them to really ramp up the level competition, a larger number of consumers will also need to deal with the new generation of fintech firms.