Open banking is all about transparency. As we all know, banking institutions haven’t been overly trustworthy in recent times, and open banking changes that. Open banking gives bank customers direct access to their data and allows them to request that data to be sent to other financial institutions. Why would you want that?
Well, we’ll tell you why – it gives you more options. More options means better deals, larger savings, and greater control over your finances. Sharing data understandably might not sound like a great idea to some, but today we’re going to show you how this development can actually benefit you and your business. Keep reading to find out what the deal is with open banking.
What is it?
Who hasn’t wanted to know what their mortgage broker or bank teller was looking at as they’ve been busy typing away and holding the power to your financial freedom? Thanks to the transition to open banking, the dynamic between banks and customers is shifting – people will have more power and opportunity to choose what benefits them. Banks will need to get more competitive to hold onto once obediently loyal customers. But why?
This development comes as Australia moves closer towards an open data economy through the development of the Consumer Data Right (CDR) bill that was announced in 2017. This policy – that is being informed and regulated by the Australian Competition and Consumer Commission (ACCC), the Office of the Australian Information Commissioner (OAIC) and the Data Standards Body (DSB) – covers a range of industries, from banking, to telecommunications, and energy, and is designed to give consumers better access to and control over their information.
Open banking is undoubtedly a customer-focused opportunity. It gives consumers the right to not only see their data, but have it safely transferred to other financial institutions. This will benefit individuals in a few different ways. By requesting data be sent from your bank to a different bank, financial institution, or authorised organisation, you can reap the following benefits.
- You can shop around for a better deal on loans to save money on interest rates.
- You can sign up for a new product without the fuss of gathering statements and evidence from your bank.
- You can input your data into budgeting and finance apps that can help you manage your money or find better deals on the market.
As you can see, this puts the incentive on the banks to perform better and get more competitive. Not bad at all, right?
When Does Open Banking Roll Out?
If you’re with one of the big 4 banks – Commonwealth Bank, Westpac, NAB, and ANZ – then you actually already have access to some of your data as open banking has already started rolling out.
From the 1st of July 2020, the big 4 banks were required to make your data relating to transaction accounts, deposit accounts, credit cards and debit cards available to you if requested. For other banks, this feature will be available from February 2021.
For data relating to home loans, investment loans, personal loans and joint accounts, you have to wait until the 1st of November 2020 to access this information.
For a precise timeline, check out the Australian Banking Association’s open banking infographic
(scroll down to the bottom of the page!).
How Can This Benefit Your Business?
We’ve looked at how open banking can benefit an individual, but how can small to medium businesses use this to their advantage?
Opening banking benefits businesses as they can access information to their business’ finances – including all of their accounts (for cash management, GST, tax, and others), business loans, lines of credit, overdrafts, investment loans, as well as any other ties they have with their bank. Much like with individuals, this gives business owners a better understanding of their financial position, which can give them the backing to search for a better product on the market. For example, a small business owner may wish to transfer their accounts to a bank with lower account fees.
When looking at purchasing a new product (like perhaps a loan), you will be able to instruct your current bank to send the data they use to determine your ‘rate’ or ‘price’ to other banks. This allows for quick and easy comparison of deals and services to find what is best for your business, whilst the release and use of data is completely in your control.
Already, some accounting platforms are using these changes to enhance their services. Xero
, for example, has enabled a two-way data-sharing pathway between their online accounting platform and banks. To learn more, check out one of our recent articles on The Ins And Outs Of Bookkeeping For Small Businesses
Of course, most importantly, it provides business owners with full control of not only their data, but their overall finances. You can feel safe and reassured knowing that your data is secure as banks are required to enforce stringent data protection and privacy measures.
We all know how complicated of an affair business banking can be, especially when there’s multiple accounts and loans that factor into the equation. It can be a lot to deal with. Open banking makes your life a little simpler as you are not required to hunt through all of your information yourself. Now you just need to do a little research to find your ideal product and you can get your bank to sort out the rest.
Who Can Send or Access the Data?
Firstly, it’s important to understand that the whole point of this transition and the CDR is to provide customers with more control over their information and how it is used – and of course, to ensure that data is safe. Therefore, only authorised third parties (such as authorised banks) will be allowed to send or receive data. There are over 40 institutions in Australia that either are or will be one of these accredited parties.
Another important thing to remember is that your data can only be shared with your permission – banks will have to go through the following process with you.
- Your consent must be given
- An identity check will be conducted
- There is confirmation of the data you’re sending
- Data is then shared
- Then you can begin utilising the service by using it to your advantage. Don’t forget, you are able to withdraw your consent at any time.
Is It Safe?
Your data is required to be protected at all times with your financial institution. A breach of privacy or any foul play means serious trouble with the ACCC, OAIC, and DSB – resulting in harsh consequences. So, taking into account the strict rules surrounding permissions required to send data, open banking does appear to be quite safe. And at the end of the day, it gives individuals and small businesses the leg up they finally deserve. So, if it’s going to better your financial position, why not use it?
Shoebox Books are bookkeeping, accounting, and tax agents that specialise in small to medium business transactions. We help uncomplicate your finances for you, so that you can get back to doing what you love. Contact us
for a businesses consultation today.