Open Finance — is it changing the way we think about money?

The concept of money has not changed for millennia. It is a point which I have not had reason to sit down and think hard about until recently. But it’s true. According to Encyclopaedia Britannica, the use of metal for money can be traced to Babylon before 2000 BC, with the Mesopotamian Shekel. It is a store of value which one can provide to another person, often in exchange for goods or services.

While money hasn’t changed, the way we access it has. But it has taken a long time.

It wasn’t until the late 1950s that credit cards and charge cards were invented, popularised in the 1970s. And it took another decade until EFTPOS was invented, allowing real time funds transfer at the point of sale.

Today, we can digitally access money through cards, internet banking and an ever increasing number of payment apps. The Mesopotamian Shekel has come a long way.

Evolution or revolution?

The driver of this evolution has been technology. However, in my view, this focus on the ways we access money actually camouflages the more fundamental change which we should recognise — on the way we even think about money.

Money is no longer simply a store of value exchanged at the end of a transaction. The way we transact is now part of the customer experience. It is not the end of a purchase but the beginning of another one.

Think about the last time your bank enticed you with a discount at an online retailer because of your transaction history? It is happening more often than you think.

Enter Open Finance

Open Finance will allow and require the exchange of consumer data between organisations within designated industries, at the direction of the consumer.

Open Finance (through Australia’s Consumer Data Right (CDR)) is revolutionising the way we think about money. It is really becoming more than a medium to exchange value, but part of the whole customer experience.

In the insurance context, this could be minimising the number of direct debit failures which are costly for the insurer but also for the customer.

To gain some more insights, I asked Elliott Donazzan, Co-Founder and Managing Director of Payble what he thought. Payble uses the CDR to verify whether there might be sufficient funds in a customer’s bank account before a direct debit.

He said:

Forward-thinking businesses across the economy are already realising gains to their bottom-line through the CDR’s Open Banking protocols. Payble’s platform which harnesses these protocols can improve customer experience.

Donazzan explained that the technology allows companies like insurers to ‘gain insights on payment sentiment and late payments’, and ‘offer pro-active payment repairs, before payments fail’, thereby contributing positively to Net Promoter Scores.

Through Open Finance, Payble helps companies place customers first by making it simpler for them to meet their payment obligations, and secondly it enables companies to improve their customer experience.

I am not going to go into any more detail here about Open Insurance, you can check out my recent podcast with Brenton Charnley of TrueLayer or this blog article for more details if you’re interested in learning more.

Why is a change in mindset relevant?

The shift from seeing money as simply an exchange of value to being a customer experience in its own right is relevant and significant. It prompts businesses to reconsider how they view the exchange of money, seeing it not just as an exchange of value but also an opportunity to deliver outstanding customer experience. This shift in mindset, to focus on the customer, also future-proofs Open Finance from falling out of step with community expectations.

While the CDR will provide many ways for participants to deliver hyper-personalised offerings to their customers, through gaining a deeper understanding of customer’s economic behaviours, it should not come at the expense of risky data handling or undesirable methodologies in the eyes of the customer.

The intent of the CDR is to give control to the hands of the customer. The CDR rules and accreditation process is designed to protect what is the ‘consumer’s data’.

By the changing changing the way we think about money in the first place — it is now part of the customer experience — we can help make sure these new technologies continue to meet community expectations and benefit all parties. It is not only the end of a purchase but, if done right, the beginning of another one.

Tim Chan is an insurance & insurtech lawyer at global law firm Norton Rose Fulbright and Founder of The InsurTech Lawyer blog. He regularly advises insurers and startups on emerging legal issues affecting the industry. Follow Tim on Twitter: @timinsydney