CEO & Founder, Frollo
As one of only 9 companies to take part in the ACCC’s Open Banking trial and the first to become an ADR, Frollo has been leading the charge in building the Open Banking technology that will help other businesses comply, compete and innovate in the new ecosystem.
Our Founder and CEO, Gareth Gumbley, has been leading that charge. With a proven track record in building value and growing companies across a broad range of sectors in Europe, North America, the Middle East, Asia and Australia; Gareth brings a uniquely international and personal perspective to how he sees the Open Banking opportunity.
In fact, it was the combination of his experience working in the UK’s Open Banking regime and passion for helping people feel good about money that led him to start Frollo.
Frollo was one of the 9 companies in the ACCC Open Banking trial. Why did you decide to invest in Open Banking?
We made the decision to invest in Open Banking even before we started the company. Having seen the regulatory changes and investments into open payments and Open Banking in the UK firsthand, it was clear to me that Australia would follow. I saw the potential to leverage that opportunity and build a company that was about putting the consumer first and helping them feel good about money.
The investment thesis was decided many years ago, we’ve just been waiting for the regulatory frameworks to arrive. That foresight enabled us to make investments that put us in the right place to get accredited for the arrival of CDR.
Thankfully we had some good fortune along the way and were capitalised well enough to be able to make the significant investment required to become an accredited fintech in this space.
It's now more than a year since you participated in the ACCC Open Banking trial, and you've been live with CDR since July 2020. What excites you most when you look at the future of CDR?
Looking ahead, there’s three big things that I’m excited about.
Firstly, the July 2021 milestone will bring about a much broader participation of Data Holders. We’ll start to see a broad enough provision of data and use cases to enable the ecosystem to really come to life and be able to deliver on the value proposition.
Secondly, write access and participation in the payment component will really change the value opportunity for consumers. Whether it’s about moving money or having a digital identity that makes it easier to switch from one product to another, write access is really the key to delivering a better outcome for consumers.
Thirdly, when other ecosystems (such as energy, insurance and telcos) start to come online, the ability to combine different data sets across industry verticals will allow us to really start innovating and see value from this government initiative within five to 10 years.
What do you expect the most immediate use cases to be in the next 12 months?
The easiest one to get your head around is removing friction from the loan application process. Moving to a point where there are enough data points available to a lender for a customer to be pre-approved, will make it that much easier for both customers and lenders. Customers will know how much effort will be required of them to get a loan.
The ability to validate income and expenses through CDR, combined with changes to responsible lending, will create a new risk framework for a much bigger push by incumbent financial institutions to leverage data.
With the Government proposing shifting the responsibility for providing an accurate view of expenditure, the sweet spot will be when there is a framework for responsible lending where a statement of position validated by the customer is acceptable to the lender. We need a common framework and data set for that to happen. Better data sets will also allow new lenders and neo-lenders to compete much more aggressively.
Fintechs will just be leaning into the data to look for opportunity on how they can help you save money or be better off financially.
There are some interesting use cases in the UK where Open Banking data is being used to validate information for the account verification and onboarding process across a range of different applications. For example, if you were wanting to rent a home and had no history of renting but had been paying rent to a housemate over a period of time, you can now use that information to demonstrate your ability to service rental costs on your own.
That kind of data set didn’t really exist before so there was a lot of risk for the vendor, but with CDR you can remove that risk and reduce the cost, to increase the confidence for both parties.
What do you see as the biggest challenge for CDR to become a success?
The biggest challenge is giving organisations enough clarity about what it takes to become involved in CDR so that they can assess the costs and return on investment. As it stands there is ambiguity around the process to become an ADR – it’s complex, the rules aren’t clear and for many it’s perceived as a mountain too big to climb.
Getting clarity around the costs involved is another factor and the only way for that to happen is have more organisations coming onboard and becoming accredited. The more businesses that are accredited the better, and that’s where the ACCC is putting a lot of its focus. The momentum will come as more businesses are involved and more people start benefiting from CDR and showing that value in a way that creates FOMO (fear of missing out).
Lastly, successful participation from data holders is also important. If the infrastructure, organisations and data quality are not good enough then the use cases will fall over. It’s a matter of getting all the ingredients and processes right – and delivered in the right order – so that we have a recipe for success.
What does it mean for Frollo to lead the charge in Open Banking?
There’s positives and negatives that come with going first and going hardest. It’s a bit like climbing a mountain, you don’t just walk straight up.
The first to the top has to find a successful path to the summit, and then the next one up learns from their experience and it gets easier and easier. So, on the downside, it costs more, is much harder and more complex to be amongst those leading the charge because you are carrying the load for those who follow.
On the positive side, the fact that we have navigated so many paths has given us the depth of experience and understanding of CDR that will make it much easier for us to navigate the many changes that inevitably lay ahead. It’s also given us the opportunity to invest and build strength in our infrastructure and people.
Our challenge now is to maintain the momentum we had coming into it so that we share our learnings with other organisations, and support the ecosystem around us to all be part of something much bigger and exciting in the future.
What advice would you give organisations who want to compete using CDR data?
My advice is to clearly define the use case for CDR in your organisation. Getting clarity around what an MVP looks like will allow you to contain your costs and demonstrate results much faster. If you try to take it too broad it’s going to cost you more, take longer and get more questions from your executive team.
At this stage we are particularly looking for innovators and leaders who are willing to step forward into CDR and take a risk. Once we have more organisations successfully delivering on more use cases the ecosystem will be ready for innovation to thrive.
This interview with Gareth Gumbley was originally published in ‘The state of Open Banking in Australia (2020)‘: a comprehensive report on the state, challenges and opportunities for Open Banking in Australia, based on an industry survey and interviews with leaders in the space.