What is open banking?
Open banking is the practice of sharing your financial data electronically, securely and with your explicit consent.
With open banking, customers can quickly obtain access to their banking data and have it transferred to service providers who they trust.
With open banking, you can effortlessly give access to your banking data with just a few clicks.
What are the benefits of open banking in Australia?
Once open banking in Australia is fully implemented, consumers can:
- Get real-time quotes on interest rates and terms of your credit cards, home loans and other financial products as lenders will have all the information needed to provide you with an accurate quote.
- Improve their ability to compare and switch between products and services.
- It will also encourage competition between service providers, leading not only to better prices for customers but also more innovative and tailored products suited to their needs.
- Smaller lenders and fintech lenders will have all the data they need to compete toe to toe with the major banks, who currently hold all of this data.
Can open banking get me a better deal on my home loan?
Yes, under open banking, you can provide access for all your banking data to your broker or lender. They can then see all your income, expenses, debts and balances.
- This means a faster turnaround time to a better and accurate credit decision.
- Being an existing customer of a lender becomes less of a benefit when applying for a loan. Now every lender can see the same data and knows who you are.
- The UK has had this system for some time. In fact, your income is often shown on your credit file! This system makes home loan approval much faster.
What are the disadvantages of open banking?
However, it is not without its own inherent drawbacks for home loan borrowers.
- If your privacy is a concern then this isn’t great for you. You’re sharing literally all of your transactions and behaviour. Thankfully you need to give your permission.
- Giving too much information to a lender may open a can of worms. They need to ask about anything they see. This may mean a slow process or a decline for people in complex situations.
- There are cybersecurity concerns such as identity theft, data breaches and malicious cyber attacks.
When does open banking start in Australia?
Open banking has already started rolling out in phases starting with the four major banks who will provide:
- Basic product information such as credit and debit cards, deposit and transaction accounts is to be made available from 1 July 2019.
- Consumer data for home loan products are to be made available by 1 February 2020.
- Consumer data on all products recommended by the Review will be available by 1 July 2020.
So far, three of the major four banks have voluntarily shared generic product data except for NAB.
All other lenders and banks will have an additional 12 months to implement for each of the date mentioned.
The ACCC (Australian Competition and Consumer Commission) will be responsible for the phased implementation and will have the flexibility to adjust the timeline for implementation where necessary.
What data can be shared?
The data that can be shared are based on product type:
- Savings accounts
- Call accounts
- Term deposits
- Current accounts
- Cheque accounts
- Debit card accounts
- Transactions accounts
- Personal basic account
- GST and tax accounts
- Cash management accounts
- Farm management deposits
- Pensioner deeming accounts
- Mortgage offset accounts
- Trust accounts
- Retirement savings accounts
- Foreign currency accounts
What are open banking legislation in Australia?
In 2017, the Australian government introduced the Consumer Data Right with the aim of giving consumers the right to access and share their data with trusted parties.
Basically, data held by businesses about a consumer must be disclosed at the direction of the consumer to accredited third parties.
The government decided that it will be implemented first in the banking sector, followed by the energy and the telecommunication sector.
In simple terms, open banking is the application of Consumer Data Right to the banking sector.
It will be established primarily through amendments to the ‘Competition and Consumer Act 2010’ and the ‘Privacy Act 1988’.
What are open banking regulations in Australia?
The ACCC (Australian Competition and Consumer Commission) is the lead regulator and will be supported by the Office of the Australian Information Commissioner (OAIC) and the Data Standards Body.
On 29 March 2019, the ACCC published the CDR draft rules for banking known as ‘Competition and Consumer (Consumer Data) Rules 2019’.
Moreover, the ACCC will also maintain the Register of Accredited Persons who have been granted accreditation as an Accredited Data Recipient.
How does open banking work?
Open banking utilises APIs (Application Programming Interface) to securely share data with accredited persons and institutions.
Simply speaking, API is the software which allows apps to talk and share data with each other.
Currently, Data61 is working with regulators to develop the open banking standard.
How do I access my data?
In order to get access to your data:
- Make a data request with the data holder’s direct request service.
- Unless covered by an exception, your bank will disclose the requested data to you via the same platform.
Alternatively, you can authorise a broker or lender to access your data.
How do I safely share my financial data?
You can rest assured knowing that financial institutions and other companies who participate in open banking will need to be accredited with the regulator and adhere to strict security standards when accessing and storing your data.
These organisations will also only be able to access your data with your explicit consent and will also be subject to the privacy act.
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