Open banking – what it means for you

Open banking is almost ready for kick-off

19 February 2019|4 minutes read

hand opening door

By now you may have heard about open banking, which was intended to roll out in mid-2019.

That date has been pushed back a couple of times, and right now, open banking is due to launch on 1 July 2020. Behind the scenes though, the big banks have been gearing up for what some are describing as one of the biggest changes to financial services in a generation.

Here’s how it works.

At present, it can be challenging to gethold of all the financial data that your bank holds about you – and harder still for either you or your bank to send that information to other banks or companies. 

But, it does mean that something as simple as changing your everyday bank account can be a time-consuming process. Worst case scenario, it may mean putting up with a product that’s no longer suited to your needs just to avoid the hassle of switching.

That’s where open banking is set to shake things up.

The potential for a better deal

The idea behind open banking is that you’ll be able to ask your bank to send your data to other banks or organisations, giving you better control over your financial data and how it’s used.

But it’s not just about control. Being able to shift your data to a new bank or service provider could help you find a better deal or improved service. It’s expected that this will boost competition, which is a plus for all of us.

Think of it this way. At present, when you apply for a home loan, the lender makes a decision about the level of risk you pose based on your credit score and details of your income and expenses. But that may not paint a complete picture.

With open banking, you’ll be able to authorise a new lender to access your data from your current bank. If the numbers show that you’re a good money manager, who consistently pays bills on time without letting your account take a dip in the red, you could be rewarded with a lower interest rate.

The idea behind open banking is that you’ll be able to ask your bank to send your data to other banks or organisations, giving you better control over your financial data and how it’s used.

But it’s not just about control. Being able to shift your data to a new bank or service provider could help you find a better deal or improved service. It’s expected that this will boost competition, which is a plus for all of us.

Think of it this way. At present, when you apply for a home loan, the lender makes a decision about the level of risk you pose based on your credit score and details of your income and expenses. But that may not paint a complete picture.

With open banking, you’ll be able to authorise a new lender to access your data from your current bank. If the numbers show that you’re a good money manager, who consistently pays bills on time without letting your account take a dip in the red, you could be rewarded with a lower interest rate.


What about security?

Under open banking, businesses can only access your data if you've granted permission.

It’s a no-brainer that giving a third party access to some very personal information calls for solid data security controls. That’s one reason why the launch of open banking has been delayed: Our consumer watchdog the ACCC wants to be sure the security around open banking is absolutely watertight.

Where to from here?

Initially, open banking will be restricted to the major banks, with data to be made available on credit and debit cards, plus deposit and transaction accounts from
1 July 2020. Then, from 1 November 2020, consumers can agree to share data around their home loan or personal loan.

Eventually, open banking will extend to the energy and telecommunication sectors.

Remember, you don’t have to go with open banking. It’s your data, your choice. And while open banking can potentially let you access better value products, it pays to be mindful of how you manage your money.

For more on how open banking could impact your home loan options, go straight to Aussie.

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