Open Banking is coming to a bank near you
The ability to access and share your data to get the best-value financial products is good news for banking customers says
Bank of us, CEO Paul Ranson.
As the dust settles on this year’s Federal Budget announcement, it’s clear that the headliners were income tax cuts and billion-dollar infrastructure allocations.
It certainly wasn’t ‘Open Banking’ or ‘Consumer Data Right’, yet, both featured in the Treasurer, Scott Morrison’s Budget speech, and both will have a significant impact on all Australians.
In his speech, the Treasurer spoke of “a strong economy needing a strong, accountable and competitive 21st century banking and financial system” and indicated that the Government would progress with their “Open Banking Regime and Consumer Data Right”.
There is a move towards making banking easier for customers. Earlier this year, the Australia’s payments system was in the news, with the launch of the New Payments Platform - the advanced payments infrastructure that has been built by the Australian banking industry and enables cash to be transferred between accounts at different financial institutions instantly.
Now customers can add a PayID to their account - like a mobile number or email address – so they don’t need to remember their BSB and account number. The advantage of a PayID is the ability to move it between accounts, and in effect, bring any payments linked to it, along with it.
Consumer Data Right and specifically, Open Banking will make banking even easier. It will give small business and individuals greater control over their banking information, more choice in their banking, greater ability to manage their money and more confidence in the use and value of their data. Ultimately, it will remove the barrier of ‘it’s just too hard to switch banks’.
Customers often stick with their bank because of this ‘too hard’ factor. Consumer Data Right in the banking sector will empower people and make it easier for them to find a better deal or compare products - by simply allowing a comparison service to access their individual financial circumstances they could find a product that is right for them.
In addition to the Budget announcement, the government also issued its response to the independent review into Open Banking. The government has said that it will phase in Open Banking, with the data on most banking products available by July 2019 and mortgages following by February 2020. All other banks will also comply but with a 12-month delay on these timelines.
There are of course risks when sharing information. According to the Review, Open Banking’s success depends on there being trust in those operating the system. And it will be important to get the right systems in place to ensure strong privacy protections for customers’ banking data.
The Government is committed to ensuring that it will only be trusted and accredited bodies that will be allowed access to a customer’s data and that it will be available, only, by the express consent of the customer and used for the purposes it was intended for.
Consumer Data Right will eventually be applied across other sectors, including energy and telecommunications. The same principles that apply to Open Banking, that is, it should be customer focussed, should encourage competition and create opportunities, and be efficient and fair, should also apply across the board.
In the Budget delivery, $44.6 million (over 4 years) was earmarked to develop and implement Consumer Data Right. The key players in delivering the Open Banking reform will be the Australian Competition and Consumer Commission, Office of the Australian Information Commissioner and CSIRO. Together they will develop the rules and standards and assess the privacy impact.
As Tasmania’s only Tasmanian-owned, customer owned bank, Bank of us is looking forward to working towards the delivery of this important reform, one that has the potential to positively change the way Tasmanians interact with the banking sector.