What is open banking? Will it save you money? Is open banking safe and secure? Let’s see if we can answer these questions.
What is open banking?
Open banking is a system that provides you with financial institutions’ data, allowing you to securely share your financial data with a range of financial institutions. This makes it easier for you to easily transfer funds between these institutions and find product offerings better suited to your financial needs. No more being locked into one banks’ products or being automatically shoved into a financial institution’s products.
According to Investopedia, open banking forces large, established banks to be more competitive with smaller and newer banks, ideally resulting in lower costs, better technology, and better customer service.
Open banking regulations allow you to better evaluate a bank’s quality of service and provides more transparency of fees and services to help you get the best possible customer experience.
“It gives customers more control as to who is providing services and to compare products and make sure they are happy with the choices they make. More availability of information will help drive efficiency and innovation,” said Westpac chief Brian Hartzer.
Will open banking save me money?
Possibly. In a case of finding out something you already knew, the banking royal commission found that customers could get better deals by switching banks, only most customers were either too lazy or didn’t know enough about how to switch.
Open banking could make it easier for you to switch banks. And while it won’t be as ‘easy as flicking a switch’ in does make the process of switching between banks less painful and and help to overcome the ‘hassle factor’.
Currently, financial institutions of which you aren’t a customer have access to limited data that tells them what type of credit risk you are, which impacts the terms offered and limits the likelihood of you finding a better deal.
Open banking allows you to authorise any accredited entity to access more comprehensive data from your current bank, potentially increasing the likelihood that you’ll be offered a better deal on a credit card, mortgage or other loan.
Is it secure?
Open banking only allows businesses to access your data once you’ve authorised it. Only accredited entities who have satisfied stringent accreditation protocols can access this data.
The Australian Competition and Consumer Commission (ACCC) and Office of the Australian Information Commissioner (OAIC) sets the accreditation criteria, which includes privacy and information security requirements.
Data is shared using an Application Programming Interface (API), which experts say is the most efficient and secure way to share data with third parties.
Unless you provide explicit consent, your bank can’t share your data with any other business. But if you’re open to it, you can tell your bank to share your data with any organisation or business you nominate – even a direct competitor.
Banks are also among the world’s heaviest investors in cybersecurity.
Have you used open banking since it was introduced last year? How would you rate your experience?
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