Information is power, it always has been.
But what’s different now, compared to a mere couple of years ago, is the capacity for businesses and entrepreneurs to collect information and leverage technology to deliver a better outcome for consumers.
Nowhere is the promise of what data can deliver more prevalent and potentially more potent than in the banking and finance industry.
The Productivity Commission (PC) is expected shortly to hand down its final report containing recommendations to the government on data use — including outlining important boundaries relating to who actually owns data — Finsia’s Retail and Business Banking Industry Council opens up the discussion about data at its recent round table.
Experts including newest industry council members, Siobhan Hayden, COO and board advisor to loan deal marketplace, HashChing, and Adrian Lovney, CEO of national payments platform, NPP Australia, add their perspectives particularly around building trust and enhancing consumer protections.
Discussion points include progression of data usage: while data has mostly been used by institutions to better understand clients so they can meet suitability requirements, the real promise of a data-rich future is to discover traits more insightful and potentially more accurate than individuals’ knowledge of their own behaviours.
Indeed, the industry in Australia and globally is only at the start of its data usage journey — 90 per cent of the world’s data has only been produced in the last two years, Grace Brasington, IBM’s global banking and financial markets president points out, speaking on a panel at the recent ASIC annual forum in Sydney.
Brasington also notes that 80 per cent of the world’s data is so-called “unstructured” data otherwise known as “dark data”, meaning traditional programing systems can't get to it.
Brasington, who works with institutions seeking to maximise their data potential, says the financial services sector every day sees a 70 per cent increase in data from the previous day.
For all the potential positives data has to offer, it’s actually a highly underused resource in financial services and banking, Peter Harris, Productivity Commission chairman points out while speaking at the ASIC annual forum, on the eve of the release on the final recommendations paper this week.
“Treasury asked us specifically to look at the finance industry in its terms of reference [for the Data and Availability and Use Inquiry],” Harris highlights.
“In summary what we found is there are potentially high community returns to be gained by better data availability in the finance sector, mostly because the quality you get in the [finance industry] data is pretty good. There is quite a long history of collection,” Harris outlines.
In line with Brasington’s observation, Harris adds that the data in the finance industry is not in a form that’s easily analysed.
“Our discussions with the finance sector suggest that while it might look like we are tremendously advanced in data analysing, the fact is we might not be as advanced as we might appear.
“We found while there was a lot of data, it's not well organised and perhaps not as readily available as we thought it might have been at the outset [of the inquiry].
“Nevertheless it’s there in depth, it is analysable with the right kind of investment. And because there are significant margins available in this industry, those margins are available to be competed away if the data is available,” he says.
As part of its recommendations, the Productivity Commission report makes a case for Australia to follow European data-sharing laws outlined in the Payment Services Directive, which requires institutions to make their data available by the start of next year.
“The fintech world over there is salivating, because as soon as they’ve got that transactional data that banks already have, it opens up a whole new universe of opportunities,” comments Steve Weston during Finsia’s roundtable discussion. Weston, formerly CEO of Barclays' mortgage business and MD of its retail lending businesses in the UK, is now consulting on digital transformation and regulation with financial services institutions here.
“Algorithms are being developed as we speak, waiting for this rich transactional data to be made available. Having this data will absolutely change the banking industry,” Weston says.
“Banks here are saying it’s a good thing for data to be able to be shared, but at the same time they probably won't mind if it takes a very, very long time to happen because it's quite a competitive advantage they’ll be giving away,” he adds.
Members of Parliament quizzed CEOs of the four major banks relating to data availability and the process to make customer data available during the recent parliamentary inquiry, which InFinance covered here.
However, the question as to who actually owns the data and how ownership practically relates to making data public is not as simple as it seems, and was a feature of the Productivity Commission findings.
The Productivity Commission inquiry isn’t just about access to public sector data and the use of that data, it is also about competition policy, Harris explains
“In practice, the great discovery in the course of our investigations … is that the primary supplier of today’s data which is being used for innovation purposes — the consumer — is in a very weak position and potentially at risk of deciding ‘I’m not interested in doing this any more … I’m not interested in playing the game because I’m at risk of being exploited’, and opting out,” Harris says.
“The best way to maintain trust with consumers is to give them back control over their data,” explains Samantha Yorke, Google Australia’s head of public policy.
“We hear regularly that what concerns people about data is they feel like they’ve lost control,” Yorke says during the ASIC forum.
“The best companies in big data are onto this; they’re onto the need to induce trust by sharing back some benefits from using your data,” the PC’s Harris highlights.