If you’ve heard of Open Banking but don’t how it works or what impact it will have on your banking needs, no worries – we’ve simplified and demystified it for you!
Firstly, Open Banking is part of a wave of reforms to increase competition in Australia’s financial services sector. As the Banking Royal Commission (BRC) has shown, the established banks have made it very difficult for consumers to get a better deal on financial products in Australia – and in some cases have broken the law to maintain their competitive advantage.
The revelations from the BRC accelerated the Federal Government’s rollout of Open Banking reforms. Practically, the reforms are supported by a broader suite of legislation including the Consumer Data Right (CDR). CDR is based on the principle that whilst we all have relationships with companies in various sectors such as banking, utilities and telecommunications – we don’t have any say in how our data is controlled, used or shared. CDR puts us in control of our data, in particular who we share it with and for how long.
Open Banking and CDR will aim to increase competition in the financial services sector – but, over time, the same principle will be applied to utilities, telecommunications and other industries.
Better deals, easier to switch
Once implemented, this will make it easier to get a better deal on financial products as well as simplify the process of switching providers.
For example, in the future when you apply for a credit card or home loan you can give a lender or comparison website access to your data from your existing accounts during the application process – allowing them to get you the best deal and helping you switch across.
What happens next?
By 1 July next year, the “Big Four” – CBA, ANZ, NAB and Westpac will make available data for credit and debit card, savings and transaction accounts. Shortly after this expect to see the first wave of apps and products to help you use and then share your data with others to get a better deal.
Following this by mid-2020 smaller banks and financial institutions will have to similarly adopt Open Banking standards, and within a few years there will be increased choice and competition in the banking sector for everyone to leverage.
At Frollo, we’re very excited about leveraging Open Banking reforms to help our users get ahead with their money, and over the next 12 months we will keep you updated on news and developments in this exciting era for banking in Australia.