Published January 30, 2018
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Retail banking data is flowing between a bank and a fintech in Australia for the first time, after the budgeting app Pocketbook connected with Macquarie Bank's new 'open banking' platform in a move the fintech says will improve its offering to customers.
The data-sharing deal will allow Pocketbook, which has 400,000 users, to provide real-time notifications about spending patterns to its customers who bank with Macquarie. The connection into Macquarie's banking systems via an application programming interface (API) is an improvement on the process Pocketbook uses to access data from other banks, which is only made available overnight.
Pocketbook, which was acquired by ASX-listed Zip in 2016, would not disclose how many of its 400,000 users bank with Macquarie; the number is understood to be small. Macquarie declined to disclose how many customers are using the open banking platform, which was launched in September, or how much it invested to build it.
The market's push to share retail bank data comes as the government prepares to release a report on the design of a legislative scheme that will force the big banks to share banking data with fintechs when a customer requests it. It is anticipated that APIs will be the technology that facilitates the data delivery.
Zip's head of strategy, Tommy Mermelshtayn, said the firm wanted to be "fast out of the blocks with open banking" and considers that under the regime "sourcing data will become easy, and it will be the ability to form insights and categorise data that will define the competitive landscape in the future".
An Australian first
While the big banks have direct API connections for business customers using cloud-based accounting software like Xero and MYOB, and for many of their institutional customers, it is believed this is the first time in the Australian market that any retail banking data has flowed out of a large bank into a fintech player.
The API connection between Macquarie and Pocketbook, which is using the OAuth2 protocol, is considered more secure than the current process used by Pocketbook and many other fintechs of acquiring data via 'screen scraping'. This involves the fintech obtaining customers' banking credentials and then using a 'scraping' firm's software to trawl online banking statements to extract data.
Mr Mermelshtayn said the deal would also make customer on-boarding much easier. Customers log in to the bank from Pocketbook's application, using their Macquarie credentials, and go to a page served to Pocketbook from Macquarie's secure environment.
The market expects the government to release the report by King & Wood Mallesons partner Scott Farrell in February. In order for the report to realise its potential, it must set out who is responsible for setting open-banking standards and implementation timetables, Mr Mermelshtayn said.
The regime is likely to lead to changes in the business models of some banks, he said. "Financial services continue to be unbundled, and open banking sets the next stage of re-bundling, or convergence, where it will be easy to view, connect and manage disparate financial products from a single source," he said.
"We could see the market shift towards 'banking as a service', where some banks become a product engine but do not own the customer relationship. Open banking might allow others to hold customer relationships without having to offer a current account."
The head of personal banking in Macquarie's banking and financial services group, Ben Perham, said if customers wanted to use their data to connect with another service, it should be made easy and secure.
"We look beyond financial services to the leading digital experiences our customers expect. This means we've enabled our customers to share their data securely, control the connection, and enjoy a more personalised banking experience," he said.
The report on the design of an Australian open-banking regime comes after open banking was turned on in Britain in mid-January. However, Barclays, Royal Bank of Scotland, HSBC, Santander and Bank of Ireland are not participating yet, after they asked the British Competition and Markets Authority for more time to comply.
Re-disseminated by The Asian Banker from Afr.com