What’s ‘open banking’ and what it does mean for me?
The year 2000 terrorised people across the globe with fears that the ‘Y2K bug’ or the ‘millennium bug’ would see computers destroy the world.
Twenty years on we’ve had iPhones, iPads, Galaxies, the 2012 apocalypse scare, Siri, Alexa and now: open banking.
If you’re wondering what open banking even is, you’re probably not alone.
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While the Banking Royal Commission didn’t have any effect on the pay cheques of executives in the financial services industry, it did shine a bright light on the fact that Aussies were being rorted by the big four banks when it comes to products.
Following on from that, in August last year, the government passed Consumer Data Right laws to give Aussies the power to access and share their data to help them get better deals.
And while those laws will actually mean data is shared across every industry, the first cab off the rank is your banking data, hence the term ‘open banking’.
What banking data will be shared?
Open banking will require banks to share data on what, where and how you’re spending your money, according to Finder.
From July last year, the big four banks have started to share information on the products they offer through an Application Program Interface (API - the programming that allows computers to share information).
February 2020 is the hard deadline for the big four banks to be ready to provide customer data for credit cards, debit cards, deposit accounts, savings accounts and transaction accounts.
They’ll also need to provide product reference data and consumer data for home loans, according to Finder.
If you bank outside the big four, the deadline for those banking institutions to have your data out in the open is July 2020, so you may not see your data for a little longer.
What does this actually look like?
Open banking will mean you’ll be able to see all your spending in one place, so you can see where you can make savings or switch to other products.
Right now, applying for a loan or a credit card can be a pretty long process, but with open banking, the forms that come with applying for those products are essentially redundant, because lenders and banks will be able to see your data.
There will be budgeting tools available on dashboard-like platform that can help you keep tabs on your money and categorise your spending, and even apps that tell you where you can save cash on certain bills.
Are people actually going to use open banking?
Speaking to an audience on an open banking panel, Finder CEO Fred Schebesta said he expected the take-up of open banking to be a “little slow”.
“In the UK, it took a good year,” Schebesta said.
But once the idea gains traction, people will expect the speed and efficiency of open banking “just like they expect an Uber to rock up in three minutes,” Schebesta said.
I’m worried about my privacy. Is open banking safe?
Schebesta said open banking wouldn’t make it any easier or harder for hackers to steal your information.
“It will come down to the banking institution,” he said. “Using brute force to enter a banking app through a phone is near impossible...most hacking is done through impersonation.”
And that impersonating concept is still a risk, but Finder said the ACCC has set some pretty high standards for banks to meet when it comes to making open banking secure.
“These standards are similar to what was set in the UK, and so it will be a relief for people to hear that there haven’t been any major leaks of open banking data in the UK to date.”
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