What is open banking? Can it save you money?

What is open banking? Can it save you money? Should you trust it?

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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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    COMMENTS

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    Waiting to retire at 70
    3rd Jul 2020
    11:17am
    If an "open banking" company does not have an Australian Banking License or an Australian depositing license, then FORGET THEM. Too risky.
    johnp
    3rd Jul 2020
    12:10pm
    I would be reticent to allow open banking especially cos of the recent cyber attack by hackers ostensibly by suspected chinese origins
    BillW41
    3rd Jul 2020
    2:27pm
    No, no. no! I worked in banking for 34 years and during that time it was completely illegal to even discuss mutual customers between banks to the extent that, when I started work in one bank while my father was working in another, we weren't allowed to work in the same town! We might have talked about customers who had accounts with both and that could have led to dismissal. Why are we going down this path? Customer info should remain sacrosanct. Vague financial opinions used to be allowed between banks but I believe they are no longer used or permitted, so how can "open banking" be sanctioned?
    Greg
    3rd Jul 2020
    5:12pm
    The system is not open slather, say you're a CBA client, you want a better Home Loan rate so you try WPC, you go in and WPC (only after YOU say it's okay) can get your financials from the CBA. This saves going through the entire application process, particularly self-employed who can have a myriad of information to go through.

    Remember, it's not like ANZ can call NAB to find out info about someone, it must be authorised by the customer first.
    Incognito
    3rd Jul 2020
    3:00pm
    Don't believe it will save us money, more like another way for banks to make more money. It will end up being used for an excuse for businesses to find out more about our financial situation. I can see this not ending up good for anyone except the scammers out there.
    Greg
    3rd Jul 2020
    5:21pm
    You really have no idea do you.

    It can save you money by allowing people to change banks easily to get a better deal at another bank or financial institution, that's all they mean.

    The customer of the bank will have to authorise their bank to release information to another bank, businesses can't asked the bank for the info, only the customer can authorise the access to the information. When they talk about "businesses" they mean banks, credit unions, loan providers, Home Loan providers, and financial business that YOU have authorised first. ABC company can't just get your info.

    It's all about being able to move between banks/financial institutions more easily, that's all, to enable getting a better deal.
    BillW41
    5th Jul 2020
    2:47pm
    Transferring accounts between banks used to be very easy. Customer signed a request form at new bank which sent a "bill for collection" to the original account holding bank which was obligated to act on it within a day or so and transfer everything, balances, periodical payment information, etc. I don't know when or why it became difficult after I retired.
    Greg
    7th Jul 2020
    9:48am
    They are talking about loans not deposit accounts, you couldn't transfer them, you had to apply for the loan from scratch and payout the other bank. The new back couldn't get financials from the old bank, only an "opinion", this system will allow the new bank to request the financials only after the customers consent.


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