A revolution is coming to financial services in Australia and based on research conducted by Queensland University of Technology in 2015, eventually, it could save us $11.6b a year. The research gave rise to the idea of a ‘lazy tax’ – the cost that Australian consumers pay each year for being too lazy to switch to the best deals on their banking, insurance, groceries and utility providers.
But calling it a ‘lazy tax’ is overly simplistic. In reality, its the cost of poor or incomplete market information (or just not being aware what the best deal is) and the cost of it being too hard to implement a switching decision and actually move providers.
But things are about to change – complete and accurate market information will become available and the effort required to switch providers may fall dramatically.
Driven by political pressure to increase competition in financial services, the progress of similar overseas initiatives and ongoing advances in technology, the implementation of an Open Banking regime in Australian seems almost inevitable now. If you haven’t seen them, the Productivity Commission made a number of recommendations following their enquiry, including establishing a comprehensive consumer right to their data. Now The Treasury have the Open Banking Enquiry underway headed by Scott Farrell.
There is a lot of the detail to figure out and incumbent financial institutions will have a strong incentive to slow down the implementation as long as they can. Ultimately there is a lot at stake. But we could see the first elements of an Open banking regime within 12 months. My guess is that this will include more transparent and accessible product and pricing information to make comparing financial services products much easier. This will be followed by a standardized way for consumers to authorize and share their transaction and product usage data with third party organisations. The final piece of the Open Banking regime puzzle will be the ability to instruct your financial institution to open an account, switch your account to another provider and close your account – al electronically and seamlessly.
Whilst the initial focus is on Banking, over time we should see the Open Banking regime morph into a significantly broader Open Data regime covering all industries and sectors of the economy.
By that stage, Open Data will have had a massive impact on consumers and on the economy.
Just imagine, one, or perhaps a series of consumer advocate ‘bots’ acting for you – day in day out optimizing your purchasing decisions for you – not just based on the deals available but also on your usage and transaction data. Automatically switching you from one financial institution to another when interest rates or account keeping fees change, automatically switching insurance providers when premiums change, analyzing your grocery spend and recommending where you should shop, and switching electricity providers when your usage patterns change. We’d all be $11.6b better off.
At MoneyBrilliant, this is the kind of future we are working toward. We are strong supporters of Open Banking and Open Data. We think it heralds the start of a new era of consumer power. Bring it on!