Open Banking explained
Big changes are happening with Australians banks which could change the way you manage your finances and borrow, find out what this means for you.
From 1 July 2020 all banks will implement Open Banking in Australia.
The Government’s decision to introduce an Open Banking regime in Australia is set to create more choices for banking customers and give them better control over data relating to their finances and transactions.
On the 1 July 2019 the four major banks including Commonwealth Bank, ANZ, Westpac and NAB implemented the first round of Open Banking, with all non-major banks to follow in 12 months’ time.
So, what is Opening Banking? And how will it impact you as it rolls out across the country by 1 July 2020?
What is Open Banking?
Open Banking is sharing financial information electronically, securely, and only under conditions approved by the customer. Open Banking gives customers greater access to and control over their own banking data. It is designed to give customers:
- More competitive banking products
- Better financial management, accounting, tax and budgeting tools.
How does it work?
Open Banking will be rolled out in stages with the first stage involving the major banks making data on credit and debit cards, and deposit and transaction accounts available as a pilot scheme from 1 July 2019.
By July 2020 all the major banks (with all other banks having up until July 2021) will have fully rolled out Open Banking.
If you are happy with who you are banking or are otherwise not interested in comparing what else is available in the market, then there is nothing that you need to do. Other banks cannot access your data and make offers to you.
If you would like to switch banks for any reason: a lower interest rate, less fees, better customer service, a closer branch, or a better mobile app, then you can authorise your bank to share your banking data with any other accredited business.
This allows the competitors, of your choice, to see if you have been consistent in repaying the mortgage or are a good saver which will allow them to make a more personalised offer for your banking.
Should you choose to change banks you can authorise your current bank to send all of your details to the new bank and reduce some of the hassle.
Are there risk involved with sharing financial data?
Sharing your data gives the business a better understanding of your financial situation and transaction history, while this can help those with good records receive better offers, those with a poor financial history could find themselves excluded from certain deals or targeted by fringe lenders.
You should be aware of what information you are sharing. The premise of Open Banking is that you are in control of your data, but this also means you shouldn’t be reckless with it. When decided whether to share your data:
- Ensure you are sharing with reputable third parties.
- Make sure you understand what information you are consenting to share and if that consent has an automatic expiry date.
What are the benefits?
Australians will have great control of their personal financial data, which will give them the ability to switch lenders and get a better deal on their loans. At the moment, it can be difficult to shop around as most banks will not share data with rival lenders. Open Banking is a solution to this as it helps borrowers to access more, relevant information to help them make better decisions with their money.
By giving customers access to this data it will also reduce the time, cost and inconvenience associated with identifying and selecting financial products and services. If customers are more informed and start making better choices on products, the industry will be driven to become more competitive and will be influenced to provide a better range of services and products.
The information in this article has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in the document is general advice and does not take into account any person's particular investment objectives, financial situation or needs. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives, financial situations and needs.