Ah. July 1. A new financial year has dawned upon us. It is fitting then that there has also been an evolution taking place in digital retail banking, The government says it will encourage innovation and bring about genuine competition in the financial sector which is desperately seeking to regain consumers’ trust after the aftermath of the Royal Commission. So what actually is it and how does it impact you?
What even is It?
Under Phase 1 of the rollout, all major banks will be required to provide consumers control over access to the product data for credit and debit cards, deposit and transaction accounts. From February 2020, the major banks will also make mortgage data available.
In theory, it should make it a lot easier to make sure you’re getting the most value out of your banking; you can compare products readily with other banks! Similar initiatives will be rolled out across other sectors including telecommunications, internet, and energy, as part of Australia’s Consumer Data Right (CDR).
What are the benefits?
Open banking will help shift the power back to the consumer in terms of their personal financial information. Consumers will have greater autonomy in shopping around because third parties will be able to offer competing for products that may be of greater financial value.
Remember those days where you stayed with your bank purely out of convenience, despite knowing that they may be better offers out there? Due to the increase in transparency- you can request your bank to share your financial data with other financial institutions at the touch of a button– there will be improved competition across the sector. It will also make it easier to switch banks.
Banks will also need to inform you when the introductory interest rate offer on your credit card is about to expire. That way, consumers will be more aware of the upcoming changes and prepare in advance.
Is my data still safe?
As our financial data gets integrated into increasingly convoluted cyberspace, there will inevitably be more scope for data breaches, frauds and scams. However, the big banks have all invested heavily in cybersecurity and there have been no major issues when the UK rolled out open banking earlier this year.
Moreover, the data will likely be shared by using an Application Programming Interface (API). To break that down, it’s the same tool that allows you to share your Instagram photos on Twitter. This is considered by experts to be both the most efficient and secure way to share data with external third parties.
The Wrap Up
It is important to remember that the open banking rollout will be gradual; it won’t be complete until mid-2021. However, Westpac’s CEO Brian Hartzer summed it up well when he said that the changes “give customers more control … and make sure they are happy with the choices they make. [It will also] drive efficiency and innovation.”