As Australia embarks on a series of moves to give its citizens more control over their financial information and personal data, an Accenture (NYSE: ACN) survey of more than 2,000 Australian consumers found that two-thirds (66 percent) of them are unwilling to share their financial data with non-banking organisations, underscoring the challenge that fintech companies and other digital giants face in taking market share from established financial firms.
However, the research also found younger consumers far more willing than older ones to share their data with third-party providers, indicating that the introduction of Open Banking regulations next year could pose a mounting threat for established banks. The results are in line with a similar survey Accenture conducted last year with U.K. consumers that showed 69 percent of respondents would not share their bank account information with third parties, with respondents younger than 35 years old far more receptive to Open Banking services than older consumers.
The new Consumer Data Right (CDR), unveiled last November, will give Australians access to their banking, energy, phone and internet transaction data. The financial services sector will be the first to embrace these new rules with so-called Open Banking, which will allow consumers to grant third parties — such as technology providers, fintechs, telecommunications companies, retailers and other corporates — access to their financial data, enabling consumers to compare products and services more easily.
According to the survey, two-thirds (68 percent) of consumers are concerned with how banks manage their money and financial data, following the establishment of the Royal Commission to investigate misconduct by financial firms in Australia. Despite that, 84 percent would trust only their own bank with their financial data even if a third-party provider were to offer added benefits to secure access to the information, compared with 59 percent of British consumers who said the same.
“Tech firms, online retailers and fintechs currently face an uphill battle competing with Australia’s traditional banks for customers due to the banks’ stronger trust connection with their clients,” said Alex Trott, who leads Accenture’s Banking practice in Australia and New Zealand. “But an emerging generation of consumers is much more receptive to Open Banking, and as their understanding and awareness of Open Banking innovations grow, it could have a big impact on the financial sector. Traditional banks cannot afford to rest on their laurels, as these new rules open the door to new competitors targeting young Australians.”
The survey found that while 83 percent of consumers are either unaware of or unsure about Open Banking, millennials and Gen Zers (those younger than 35) were 4.5 times more likely than baby boomers (those 55 and older) — 31 percent vs. 7 percent — to say they are aware of Open Banking and willing to share their data with third-party providers in search of better services and other benefits. The younger consumers were also eight times more likely than baby boomers to say they would use social media or an online merchant to initiate payment transactions — 58 percent of millennials and Gen Zers, compared with just 7 percent of baby boomers.
Australian consumers’ biggest concern with Open Banking centers around the security and privacy of their financial data, with nearly two-thirds (64 percent) of respondents citing that as the main obstacle to sharing their financial data with third parties. The majority (53 percent) of respondents also said they don’t understand the potential benefits of Open Banking enough to grant third-party providers access to their data, while almost half (47 percent) said they don’t think Open Banking will deliver enough value to change their banking behavior. Those figures indicate that wider consumer education on the potential advantages of the new system could create opportunities for new entrants to chip away at the market share of leading financial firms, underscoring the need for banks and other traditional players to focus on improving their customer experience and upgrade digital solutions in order to compete.
“Traditional financial firms looking to make the leap into the next generation of digital services will have much to gain from launching Open Banking solutions, particularly as a growing number of young customers focus on convenience and speed,” said Fergus Gordon, who leads Accenture’s Banking practice in Asia-Pacific. “Offering those innovations now will strengthen their position to secure the customers of tomorrow, while also helping to fend off potential rivals eager to take market share away with new services.”
Accenture conducted an online survey of more than 2,000 Australian consumers during May 2018, with the sample weighted to ensure it was representative of the country’s population.