Why being open is a good thing (in more ways than your wallet might expect)
Ana, Volt Bank, 4th May
It’s pretty nice knowing that your financial data is sitting safely in a giant vault somewhere far, far away in ‘data land‘. No one can see it or touch it; it’s safely protected out there with one of the banking giants. Until the day comes when your mortgage broker calls and tells you about a new offer from a different bank – one that will help you save on your monthly home loan repayments (meaning you could afford to eat out at your favourite Italian joint more often).
And so, with a few calls (and fees) you agree to let the broker do all your negotiating, paperwork and file transferring. After all, it’s way too painful to think about doing all that yourself, not to mention getting your 200 million points of ID in order and visiting every branch that’s only open from 10am-4pm.
We mean, it’s not like there’s any other way to do things, right?
Enter open banking.
What is open banking?
Just like your mate Bluey with the red hair, open banking is a bit of a misnomer. Why? Because it’s not exactly about getting banks to just be open. In fact, it’s much less about the banks and much more about you. Specifically, it’s about your ability to have a say over your own data. Yep, democracy and data. But don’t worry, there’s not a pollie in sight.
Having said that, we are going to speak about data so get yourselves a packet of Hobnobs, a cup of tea and allow yourself a biscuit every time we say ‘data’. A bit like granny’s Christmas pudding, this is going to be heavy, but so worth it.
Here’s the thing: when it comes to personal data (biscuit), we really think you should be able to call the shots. If it’s your data (biscuit), it kind of makes sense for you to get to decide who sees it, where it goes, and what it’s used for. We also think you should be able to easily use your own data (biscuit) to benefit you. After all, it’s yours.
This is exactly what open banking is meant to do. It is a framework put in place to make sure that you (rather than your bank) get to decide your own financial destiny.
Deciding your own (data) destiny
That’s right – open banking puts you in the driver’s seat when it comes to the data that you generate with your bank on a day-to-day basis. That’s great, you say, but why would I want to do anything with my data? Well, we’re really glad you asked.
You may not think it, but your personal financial data has real value. For example, do you consistently pay the rent and bills on time? Are you great at saving and living on the cheap? Maybe you’re ahead on your credit card or mortgage repayments.
Well, guess what? Being able to prove to different financial institutions that you’re consistently awesome at managing money or being responsible with your cash means two very good things for you:
1. You’ll be able to show a whole variety of banks that you’re a really desirable customer to have, and;
2. You’re much more likely to be offered great deals by these financial institutions as they compete with each other for you to bank with them. Enjoying deals like significantly better interest rates on credit cards or home loans might mean you’ll be eating your way across Europe or driving your motorhome across Australia several years earlier than planned.
All that just from being able to instruct your bank to share your financial data with other banks. Pretty cool, isn’t it?
And we haven’t even mentioned the equally awesome fact that you’ll never again need to dig up and resubmit 600 million points of ID every time you want to move banks. With open banking, you literally just tell your old bank to transfer all your personal identification info over to the new bank and it’s all systems go from there. It actually will be that easy peasy lemon squeezy.
Not sharing is a perfectly valid option
Look, we get it. Just like that last Haigh’s chocolate frog in your drawer, not everything is for sharing. To be clear, open banking isn’t about making consumers’ data indiscriminately available to all banks and financial institutions. It’s specifically about giving you the power to tell your bank to share bits of your data with organisations that you choose if you explicitly tell it to do so. If not, your data stays right where it is – with your bank.
Open banking just confirms your power over your own data, which means you get to choose who sees it, and what they see. So, if you don’t want your bank to share any of your data with anyone else at all, that’s 100% okay too.
What to expect and when to expect it
Historically, Australian banks have been extremely protective of their customers’ data. Perhaps unsurprisingly, they’ve been particularly careful about letting their competitors see any data that shows what a good customer you are and what rates they’re offering you – they’d risk you being wooed away by better offers.
Putting open banking in place removes the ‘informational advantage’ that big banks currently enjoy. It promotes competition among financial institutions, helps level the playing field, and disrupts the old way of doing things, giving you the power to easily use your data to benefit you, rather than your bank.
Australia is aiming for open banking to be officially adopted by banks and customers as early as 2020. Because open banking could give you and your mates considerable power to find the best financial solutions for you. The ACCC (Australian Competition and Consumer Commission) is currently working very closely with Australian banks and fintech companies to roll it out. Once the ACCC gives the framework the go-ahead, banks will have to begin sharing consumer data about debit and credit cards, transaction accounts and deposit accounts by 1 February 2020 (only if directed by their customers, of course).
Well, now that you’ve eaten your fair share of biscuits (17 by our count), if you’ll excuse us, we have a chocolate frog to eat.