Australia’s Open Banking Scheme is Set to Give You Better Control and Save You Money

Self-Employed | 29 Jan, 2020

Save money, control your data and get better products and services with Australia’s Open Banking initiative.

When it comes to accessing financial support, many people prefer to stay with one bank. Usually it’s where they currently do their banking or have their mortgage. It’s time-consuming and difficult to provide a new institution with all of your financial information. It can make moving from your current bank incredibly inconvenient.

So, consumers are often subtly strong-armed into staying with a financial institution. And this often leaves them with less than ideal loan terms. Shopping around for the best deal is simply too inconvenient. But Open Banking can relieve this inconvenience by giving you better control, choice and, ultimately, competitive deals.

What is Open Banking?

Open Banking is simply a set of regulatory rules and innovative technology that allows you to securely share your banking data with certain third parties. For example, if you are looking to re-mortgage your home, instead of going through the onerous process of filling out forms and providing backing documentation to a new bank, you can simply direct your current bank to share that information with the financial institution of your choice. This has many potential benefits for consumers.

What are the Benefits of Open Banking?

Price transparency.

Data sharing will improve price transparency and allow you to compare products much more easily.

Easy transactions.

It will be easier to complete transactions, so you’ll be better able to choose products that are the best for your specific circumstances. All without the inconvenience of time-consuming paperwork.

New products.

It will be easier to sign up for a new product, even with another institution. This gives you much more flexibility in your financial planning.

Budgeting apps.

You will be able to direct your banking data to be fed into a budgeting app. You can manage your money better, and with less hassle.

More options.

Open Banking removes the informational advantage of the big banks making it easier to access products and services from other financial institutions. This gives you more options and could save you money.

It’s free.

It costs consumers nothing to take part in Open Banking.

But is it safe?

With Open Banking, more financial information will start to pass through cyberspace. This means there may be more scope for breaches, frauds or scams. But Australian banks and government bodies have always invested heavily in cybersecurity.

They are alert to all potential issues and have undertaken substantial reviews to understand how to reduce possible risks. These include things like data encryption, robust consent and authentication procedures and security testing of API frameworks, among others.

How Does Open Banking Interact with Comprehensive Credit Reporting?

Comprehensive Credit Reporting (CCR) requires financial institutions to share specific credit information with other lenders that show a customer’s credit behaviours. You can think of it like an extension of your credit file. Some of the data shared is the number of credit enquiries a consumer makes, information on loan amounts and repayments and credit card behaviour. This is all kept on file for two-year period.

Powerful tools for consumers.

Together CCR and Open Banking are powerful reforms for consumers. With this combination of information at their fingertips, consumers have a clear picture of their financial position. And institutions are able to make faster, more accurate assessments. This will lead to more tailored financing options that give individuals better terms and value.

Getting ‘lender ready’.

The CCR and Open Banking allows you to get ‘lender ready’. The combined financial information from CCR and Open Banking allows you to take a ‘project management approach’ to your financial position. You can work to make sure you are in the best position for you before seeking any new financing or engaging with new financial institutions.

When Will Open Banking Be Available?

Beta testing has been ongoing since August 2019, and product data for credit and debit cards, deposit accounts and transaction accounts are currently available through APIs. You will be able to access your own information from the Big Four Banks beginning in February 2020. A roll out to other financial institutions, and access to additional financial data, will follow over 2020 and 2021. (You can see a full timeline here.)

It is anticipated that every bank and financial institution in Australia will be fully participating in Open Banking by July 2021.

Takeaway

Open Banking is set to save you time and money by giving you control over your financial data. You will be able to make better and more informed choices about the products that are right for you. It will also drive competition between financial institutions, meaning everyone will benefit from better prices, products and services.

Get in touch to learn more about Open Banking and how it can help you get ‘lender ready’.

 

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