For customers with the major banks, sharing data is about to get a whole lot easier – and better banking deals could be up for grabs – following the official launch of open banking in Australia.
Launched on July 1 after a previous five-month delay, open banking means major bank customers can now share financial data with ACCC accredited third parties, making it easier for customers to seek out better deals on banking products.
As of last week, major bank customers are able to share information about their credit and debit cards or savings and transaction accounts, giving customers the opportunity to ‘shop around’ for more competitive products.
Today Australia’s four major banks open up their data so that customers can share it in order to get the best deal possible on credit cards, savings accounts and other deposit products. https://t.co/XymnzywvoO
— Australian Banking (@ausbanking) July 1, 2020
From November 2020, open banking will also include the ability to share data from mortgage and loan accounts, as well as from joint accounts.
Although the first stage of open banking’s rollout is only for customers with the major banks, other authorised deposit-taking institutions are expected to get on board by February 2021.
The move is part of the Consumer Data Right (CDR), an Australian Government initiated system to improve competition in services industries by giving customers more control over their data. Through CDR, customers can share data between accredited providers to aid them in comparing products or services, or to help them access new and improved services.
Now that CDR has begun to be rolled out in the banking industry, in the future it’s thought to be introduced to the energy sector to give customers better access to product comparisons and accurate quotes.
How does it work?
Open banking is an ‘opt-in’ process and uses the CDR to let customers choose what services have access to their financial data.
To use open banking, the customer must first check whether the service they’re looking into has been accredited by the Australian Competition and Consumer Commission (ACCC). This can be checked via the online CDR Register.
Consumers can now choose to share their banking data to access more personalised financial products and services following the launch of the Consumer Data Right today. Learn more about the Consumer Data Right here: https://t.co/0mwZpKcdVw pic.twitter.com/5tJH4PCyWz
— ACCC (@acccgovau) July 1, 2020
If accredited, there will be an option on the service’s website for you to give your consent for data to be shared from your current bank. This will include options such as what data you’re willing to share, what you’re willing to let your data to be used for and how long you’re willing to share it.
Once permission is received, you will be directed to your current bank’s CDR page, where you can log-in with your existing customer ID and a unique password (provided by your current bank). Here, you will be able to see and manage the data you’ve agreed to share, as well as withdraw consent at any time.
You might also like: Young savers flock to neobanks
Will open banking make it easier for me to change banks or lenders?
In theory, yes, under open banking the process of applying for a loan or changing banks or lenders will be made less onerous and involve less paperwork.
However, given the early nature of the system many service providers are yet to register with the ACCC.
At the time of writing, all four major banks are registered as participating data holders but only two financial institutions, Frollo Australia PTY Limited and Regional Australia Bank Ltd., are listed as approved data recipients.
NAB welcomes the first phase of Open Banking. We will continue to invest in the future phases of Open Banking for a greater customer experience and the growth of the economy.https://t.co/pbP12IWGl6
— NAB (@NAB) July 1, 2020
Over time, more financial service providers will be added and by September the ACCC anticipates 39 more providers to have jumped on board as data recipients.
In a LinkedIn post, Regional Australia Bank confirmed open banking had already been used to fast-track a loan application, allowing a customer to begin and have a personal loan application approved in a matter of hours.
“Following a day of checking and fine-tuning, at 5:40 pm an online personal loan application was commenced by a new customer who elected to share their transaction history using CDR,” the bank revealed.
“Unaided, they provided consent and authorised the secure electronic transfer of 3,505 transactions from their bank to us. The data was collected in 21 seconds, completing at 5:46 pm. That data was then automatically analysed into spending categories, surfaced within the application form and original transaction data deleted, all in under 2 minutes. The customer continued with their application which was submitted and then approved by our credit team at 8:57 pm.”
You might also like: What is Comprehensive Credit Reporting and why is my credit rating set to change?
Will my privacy be protected?
In a media statement the ACCC confirmed maintaining the security of consumer data would be a top priority for the CDR.
“Maintaining security and privacy are top priorities for the ACCC, in addition to the Office of the Australian Information Commissioner (OAIC) and the Data Standards Body (DSB),” the statement said.
To used shared data, companies require ACCC accreditation which involves meeting strict security and IT requirements. According to ABC News following the launch, more than 50 service providers had applied for accreditation but only two were approved.
Canstar finance expert Steve Mickenbecker said that while there had been much discussion surrounding security and privacy concerns, it should not be forgotten that the ACCC is a regulatory body who has put safeguards in place.
“Data recipients have to jump through many hurdles to be approved, and need to satisfy all sorts of requirements with their systems and security,” he said.
You might also like: Trust to be the backbone of open banking’s success
Words by Kathryn Lee
- Australian Competition and Consumer Commission (ACCC)
- Australian Banking Association (ABA)
- Australian Government (via the Consumer Data Right website)
Is your current interest rate still competitive? Contact one of our mortgage brokers to compare your options and find a deal that suits you.