Open banking is about to shake up how Australians manage their money.
For decades, banks have held all the power when it comes to our financial data. But that’s changing. Open banking puts control back into the hands of consumers – letting you decide who can access your financial information and how it’s used.
Whether you’re a business owner, a startup founder, or just someone who wants more control over your finances, here are five things you need to know about how open banking is set to reshape the future of money in Australia.
1. What is open banking?
Open banking is a new way for people to share their financial information safely between banks and other trusted companies.
Right now, your bank keeps your data, like your spending history, mostly to itself.
With open banking, you’ll be able to give permission for other companies to access that data, so they can offer you better deals, smarter budgeting tools, or personalised financial services.
It’s gives you more control, more choice, and make banks compete harder to earn your business.
Open banking will cause a huge shift in retail banking as it will need to keep up with the modern day consumers who will expect products and services tailored to them.
2. When will open banking be introduced to Australia?
Open banking will be gradually introduced to Australia in February next year.
During the first phase, the ‘big four banks’ will have to share data with their customers relating to credit and debit cards, deposit, transaction accounts, and later mortgages.
All other banks will be given a 12 months grace period to fully embrace open banking and get on board.
3. How safe is open banking?
One of the major concerns with open banking is cybersecurity and data privacy.
The sharing of data will need to be completely secure in order for banks to comply with Australian regulation.
To improve the security of data sharing, Australia has already introduced the Notifiable Data Breaches (NDB) scheme.
This scheme goes hand in hand with the Privacy Act (1988) to make sure all agencies and organisations involved in handling personal data are held accountable.
This new legislation will shine a spotlight on ensuring personal information is stored in the most secure manner with serious consequences if data is breached.
To top that, the Consumer Data Right (CDR) was put in place to put the consumer first when it comes to personal data.
Another layer of safety can be seen through the Australian Competition & Consumer Commission (ACCC).
Overthe next four years will develop policies to protect data exchange, which will be pivotal to Open Banking. The ACCC will also make sure that the Consumer Data Right is implemented across all Australian organisations.
A lot more legislation is expected to follow to support open banking and ensure Australians are in safe hands.
4. What will open banking mean for consumers?
Australia will follow UK’s lead, as well as parts of Europe and Japan as they’ve already implemented open banking into their economy.
Now, it’s our turn. Ross Sharrott, Founder of Moneytree, who was involved in Japan’s open banking roll-out, says that Australia has a real opportunity to be leaders in this field in creating a stronger economy which uses open data sharing to benefit its people.
He explains that it all comes down to the consumer, saying, “Consumer centricity is the big change, because there has always been financial technology. The idea of a fintech company, usually means bringing a consumer centric approach to a more traditional model.”
Moving towards an economy that embraces open data sharing has the potential to create a brighter future focused on improving the consumer’s experience.
Gaps will be exposed, traditional business models will be forced to create room for innovation and people will be empowered.
5. How will open banking affect the future?
The biggest change open banking will bring is more choice, and with that, more flexibility for people looking for better financial products and services.
But it won’t stop at banks. The same idea of safely sharing your data will eventually expand into other industries like energy, telecommunications, and even insurance.
To make this happen, these organisations will increasingly turn to fintechs to help build the technology and connections needed for this new, more open financial world.
Final thoughts
In short: open banking will reshape how companies handle and share data.
It’ll push traditional institutions to rethink their systems – from how they manage privacy and consent, to how they keep data secure and give customers more control.
Power back to the people!
19 February 2019
