Chris Forrest- Senior Partner and Principal Adviser
Sovereign Wealth Partners
We all know how much hassle it is to open a bank account, get a credit card, switch home loans for a better deal and so on.
We know we should be shopping around but it becomes all too hard. We just stay with the same old bank even when we’re not completely satisfied. It’s because we don’t like the run around, providing the same information again and again, repeating ourselves and trying to decipher the best banking solution.
Open banking heralds the next stage of banking for consumers, enabling us all to take greater control of our finances with the implementation of legislative change and technology.
Banks will still hold our information, which they need to provide their services, but we will have more control over that information, who holds it and who shares it.
What is Open Banking?
Open Banking allows us to ask that our data be shared with other banks, financial institutions and authorised organisations. Up until now this has not been a requirement, making it difficult, or at the very least cumbersome, for consumers to switch to a more suitable product or service.
Approved deposit taking institutions will automatically be included in Open Banking. Other organisations who wish to be included must be authorised under the broader Consumer Data Right (CDR) initiative to be an accredited data recipient. These other organisations may be app developers offering innovative personal financial tools.
Open Banking is the first sector to introduce the CDR. CDR is a broader initiative to give consumers more control over their personal information. The next sector to introduce CDR will the energy sector. CDR is regulated by the Australian Competition and Consumer Association (ACCC) and the Office of the Australian Information Commissioner (OAIC).
How does Open Banking work?
Currently if we wish to open a new bank account, get or change a loan, apply for a credit card and so on, it is easier to go to our current bank. The reason is that they have all our data on file, including transaction history and identification. Open Banking enables us to direct our bank to share that data to any bank or lender so that it should be just as easy to acquire a new product with just about any other financial institution.
Another feature is the ability to direct your bank to feed our data into, for example, a budgeting app to assist in managing our money.
When will open banking be available?
Open Banking is a significant initiative and is being progressively rolled out. The current rollout dates according to the Australian Banking Association are:
1 July 2020 – Phase one – the Big Four banks will make available your data from transaction accounts, deposit accounts, credit cards and debit cards (Phase one). Other banks will follow from July 2021.
1 November 2020 – Phase two – the Big Four banks will make available your data for home loans, investment loans, personal loans and joint accounts (Phase two). Other banks will follow from July 2022.
For business accounts and other particular bank products not covered by Phases 1 and 2, there is a Phase 3 release.
How do I share my data?
This can only be done with an accredited CDR data recipient as noted above.
The first accredited recipient that is not an approved deposit taking institution is Frollo, a financial app provider. Using them as the example, here is how you would share your data:
- Register with the app first, select your institution and how long you’d like them to receive that data;
- Provide your consent to the app provider who will then redirect you to the banks consent portal and you repeat the process with the bank;
- You then verify this with a one-time password sent from your bank to your device to then enter on the banks website when prompted.
To check out the majors approach and policies, see the links below:
Commonwealth Bank – https://www.commbank.com.au/banking/open-banking.html
National Australia Bank – https://www.nab.com.au/personal/customer-support/open-banking