I recently gave a live briefing on my book, “The Great Transition – the personalization of finance is here,” in a dialogue with former Congressman Barney Frank and SC Ventures by Standard Chartered Alex Manson.
A select group of senior bankers, fintech players, and investors were also present.
To watch the shortened version of this session, visit: https://bit.ly/3BUzz7a
Hi Emmanuel, thank you again for the invitation to a fascinating session. I have finished reading your book, which covers a lot of ground and raises a number of very interesting issues and questions. The one thing that stood out for me was your point that individual consumers will take ownership of their own Data. This will truly change the way in which Financial products are consumed. While you do not directly refer to this in your book, this concept is taking shape in the form of Open Banking. Europe has already mandated Open banking and requires all banks to conform to it. Singapore is contemplating how to implement this concept. It is only a matter of time before the MAS mandates Open Banking. At its simplest form, Open Banking is similar to phone number portability for mobile providers. In the beginning, the phone number belonged to the mobile service provider. If you switched from one to another service provider, you needed to get a new phone number which created a lot of friction in the switching process. The Telecom regulator mandated that once a phone number was assigned to a user, that number belonged to the user. And would be transferred across if the user changed service providers. This made it very easy for a phone customer to switch service providers.
It is of course very difficult to extend this example to Account number portability as each bank has a unique configuration of Account numbers. However, Regulators are extending this concept to “Customer Data Portability”. Banks contend that they “own” the data provided to them by their customer, and therefore can not be expected to share that Data with other Financial Intermediaries.The customer is of course free to provide the same information to as many other banks or financial intermediaries as she/he chooses. However, the process of providing that information to multiple financial service providers creates friction, and therefore prevents the consumer from switching easily.
Under Open Banking, Regulators (currently in Europe, but soon elsewhere) take the view that the Data held by a Bank/FI belongs to the Customer, and the customer can give access to that data to other service providers. This I believe is the point that you are making in your book. Universal data access, once implemented, will greatly encourage monoline providers – card issuers, Mortgage companies, BNPL, peer-to-peer and payment platforms such as Wise, to access customer information seamlessly. It will also significantly increase the ability of customers to access products from a range of non-bank providers and allow them to buy from any provider they believe to be most appropriate for their need. Banks, as you can imagine, are challenging this approach. For one thing it seriously impacts the concept of Relationship Banking (Wells Fargo would not have been able to successfully implement their cross sell model under Open banking). Banks argue that at an extreme, their role could be reduced to becoming a utility which does KYC and maintains Data on behalf of its customers. In any event, this will make consumer banking very competitive. Banks also, somewhat validly argue, that this increases risks such as Cyber and Data protection. While regulators are mandating Open Banking, I am not sure they have fully worked out the Regulations needed to supervise OB. Today if something goes wrong, Regulators know whom to blame. Under OB that will not be so easy. Take the OCBC case. If a non-bank company had inadvertently allowed a successful phishing exercise against customer date held by a Bank, who should compensate the customer. The bank that held the Data, or the non-Bank that allowed the phishing to succeed.
Open banking is only possible because of the increasing use of technology. IOT, AI etc will further enhance the capabilities of how monoline service providers, specializing in products such as cards and home loans offer their products to consumers.
This is a very long way of saying that your book is exploring some concrete concepts which are still at very early stages. How these will evolve, and more importantly, be regulated is still to be seen.
Look forward to catching up,
SA