Open data used by banks and fintechs to innovate and cross-sell products must be underpinned by robust regulation that protects the consumers, otherwise they risk major privacy breaches, according to the Australian Bankers' Association.
Educating customers how their data may be used and ensuring an appropriate and well-understood consent regime is introduced were the critical issues that emerged from a recent ABA industry conference.
Consumer groups, regulators, fintechs and banks that took part in the roundtable discussion found it imperative to develop a thorough understanding of how open data affects vulnerable customers, including the implications around product access and predatory lending.
Choice head of campaigns Erin Turner, who took part in the event, said that it's time to "move beyond education" and focus on the systems and regulatory interventions that protect consumers.
One of the biggest risks of open data relates to companies and banks innovating, which doesn't necessarily deliver positive outcomes for consumers. She used the need for regulation around payday lenders that ask for access to bank accounts as an example.
"What we don't worry about is that those payday lenders are then using that data to re-market to those consumers to say, 'Ah, look, they're nearly at the end of the loan, or they look like they're struggling right now. Let's offer them another very toxic payday loan,'" she said.
Fintech Australia chief executive Danielle Szetho, who also spoke at the event, said her organisation has been working with regulators to facilitate innovation in a way that protects consumers.
Any business that is working with consumer data is dealing with trust, she said, noting that fintechs in particular don't have the massive balance sheets or the backing of major institutions and can't afford to "stuff up" customers' data.
If there are companies that are mindful of breaches or issues in this space and watching for that very carefully, because they cannot afford to slip up, it will be fintechs, she said.
"So we have been thinking about that very, very closely. And I think you will certainly see a lot of work from us in that area," Szetho said.