OPINION | Data has been touted as the new crude oil of the global economy. Advances in information technology have enabled us to capture and process more data, more quickly. This has led to the development of applications that make life easier by promoting greater efficiency and better decision-making.
Data has typically been controlled by large tech companies and financial institutions, but the open data movement is creating a fundamental shift in the balance of power in the information economy, placing more control in the hands of individuals.
This adjustment to the availability of data has already started to affect banking, utilities and telecommunications and will soon have an impact on pensions and superannuation. The prospect of open super and pensions is real.
Open data
Open data hasn’t yet peaked to buzzword status, but it includes the idea that some data should be freely available for use by the people it relates to in flexible ways that aren’t tied to a particular technology or organisation.
The ‘some’ bit is important. While there are large amounts of data that are intellectual property and therefore controlled by whoever holds the rights to own it, organisations hold plenty of valuable data about individuals that isn’t intellectual property and, therefore, cannot be owned by anybody.
Typical examples include personal details, transactional records, and information an individual or third party has provided to an organisation.
Productivity Commission’s rights recommendation
With little fanfare, the Productivity Commission delivered its report into data availability and use in early 2017. The report recommends the creation of a comprehensive right for consumers to access, or consent to third parties having access, to some data in a standard and secure format.
The fundamental premise of the recommendation is that data sourced directly or indirectly from individuals should remain accessible (however isn’t necessarily proprietary, meaning it’s not necessarily something that can be owned) by the individual.
Therefore, the Productivity Commission recommends that individuals have a comprehensive right that would include empowering an individual to share, in perpetuity, joint access to, and use of, their consumer data with the data holder, and to direct holders of data to transfer it in machine-readable form, either to the individual or to a nominated third party.
Impact on super industry
The recommendations of the Productivity Commission are wide-reaching, spanning government, academia, and the private sector (banking, social media, telecommunications, utilities).
It would be an anomaly if the superannuation and pensions industry were not the subject of new laws to govern the opening up of member data to members.
In an environment where policymakers are looking at ways to promote greater levels of engagement and competition in the industry, the member interface may present an opportunity for innovative technologies to revolutionise the interaction between a superannuation or pension fund and the member (without the costs and complexities of managing and issuing a financial product).
Many of the most successful innovations in information technology have created better markets, rather than products. Open data presents the possibility of innovative market infrastructure that promotes efficiency and engagement in the superannuation system. Superannuation funds that have struggled to make the member interface and engagements both meaningful and productive would be at a disadvantage, which would surprise some people.
Opportunities and threats
The advent of open banking in 2018 may create a brief window of competitive opportunity for superannuation entities to integrate transactional data within existing member-facing systems to enable better behavioural analysis and more efficient and targeted tools and advice.
The prospect of open super and pensions should be on the strategic radar of executives and trustee directors, as should the prospect of a competitive advantage for providers who develop applications that plug into any superannuation fund while providing a persuasive member experience.
Open super and pensions would almost certainly rely on the development of application program interface (API) standards. Having the right skills in place to develop and maintain these APIs will be particularly important for self-administered funds and third-party administrators.
Just as important will be the need to ensure that data quality is actively managed, if members are to have the key to access it. Data quality issues will be more visible to members, and potentially present a risk to reputation if quality isn’t good enough.
With so much hype around the role of tech innovation in finance, it’s easy to miss some of the most important changes. Open super and pensions present an opportunity the superannuation industry should take. It is a chance for further advancement to create better outcomes for Australians in retirement, and to continuously improve our place as one of the world’s leaders in retirement incomes.
Jonathan Steffanoni is principal consultant, legal and risk, at QMV, a consulting firm specialising in technology solutions for the financial services industry. He is a fellow of the Association of Superannuation Funds of Australia.
