Banks may currently hold a privileged position in the market, but the real opportunity for them from open banking is to start out in an ecosystem that allows them to provide new and better services to their customer base.

Thats the view of Mark Allaby, Managing Partner, Financial Services Sector, Australia and New Zealand at IBM who says this plenty of evidence from the European experience to suggest this is a very plausible thing for them to do.

Now, absent an open banking or speedier type regime the banks would have to build the ecosystems themselves. But the reality is building private ecosystems takes time, its expensive, and every bank is trying to play the same game so you would end up with a lot of duplication.

Instead, the Consumer Data Right underpinning open banking offers the banks benefits, he says.

It creates a model whereby the industry has a shared infrastructure and a level playing field. But because of the perceived upside to the fintech I think it will actually spur on innovation [by the banks]. They are very well-positioned because they do know an awful lot about that customer.

He told Which-50, They have very deep industry experience very deep relationships. They know what customers need and they really do have an opportunity to match these needs. So perhaps the introduction of CDR will be the impetus that will then will spur them on, whereas in the past they probably had the advantage of privileged access to customer information which will no longer be there.

Allaby says that the experience in Europe where open banking has had longer to develop demonstrates that there are really good innovations from incumbents developing very targeted segment-specific propositions.

The model I think is a really good exemplar for Australian banks to learn from and embrace is Rabobank, a specialist agricultural bank.

Rabo has been building propositions for agricultural segments around areas such as vet services or logistics, says Allaby.

The proposition to those businesses is that it will help you run your business. What is really interesting for Rabo is that they didnt launch propositions as Rabo bank branded services. They actually launched them as standalone almost fintech propositions and they made the very brave choice to transfer their customers from Rabo to the new startup.

This allows them to lean in and start gathering customers who were not previously Rabo customers onto these propositions and then start bringing the banking services elements back to Rabo, he said.

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Banks should embrace the open banking ecosystem: IBM - Which-50