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An Outline of Open Banking

What is Open Banking?

Open Banking is about giving Australians greater access to their own banking data and has the potential to transform the way in which Australians interact with the banking system.

Open banking is a secure way to give service providers access to your financial information. It's an innovation that allows third parties to build apps and services around financial institutions like banks.

It is the use of application programming interfaces (API) data transfer mechanisms and these are used for the efficiency of third parties (financial services) in accessing and sharing financial information efficiently with the approval of the customers, also enabling the development of new apps and services that build new digital revenues.

Open banking standards promote that data is securely shared or openly shared through these APIs by third party applications.

The APIs promote a highly secure technology platform, which ensures a high secure way of transferring data. The customer retains the ownership of the data and the only one that authorises the third parties access.

The Open Banking process is a free service to the customer.

What type of data is available?

Product Data: Information about rates, fees and features for each bank’s products. Accessible through APIs.

Customer Data: Personal information such as phone number, email, and home address.

Account Data: Account balances, direct debits and regular payments.

Transaction Data: Information about your transactions, such as where and how much you spent.

When does it start? And when can we access our data?

It has already started, in July 2019 the four major banks were asked to voluntarily make product data available for credit and debit cards, deposit and transactions accounts.

On 1st August 2019 legislation was passed by Australian Parliament.

By February 2020 the Big Fours need to provide access to customer and account data for credit cards and debit cards, deposit accounts and transaction accounts by this date, and by July 2020 the Big Four need to provide access to product data and customer data for credit cards, debit cards, deposit accounts, saving accounts, transaction accounts and personal loans.

Other Banks

Every other bank needs to provide access to product data, account data and transaction data by July 2020 and by February 2021 they need to provide access to product, account and transaction data for mortgage products.

All Banks

All banks by July 2021 need to provide access to product, account and transaction data for personal loan and other accounts.

A review by the Australian Government (2017) into Open Banking explains that Open banking is part of the Consumer Data Right (CDR). CDR enables the consumer more control over their data, more control of who can have it and who can use it. Resulting in more choice and convenience for the consumer in effect creating confidence in consumers banking experience.[1]

Both money and information are valuable and the bank would not have either without the customer.

Is Data safe?

The review suggests that open banking would adhere to The Privacy Act 1988 (Privacy Act) and the Competition and Consumer Act (2010) in which it ensures the continual protection of the customer and their data.

That said, there will need to be particular consideration given by financial institutions on the implementation of open banking with respect to their privacy protection framework. With increasing data held on their customers the impact of privacy breaches will be significantly magnified.

Trust third party organisations with our data?

The participants will be subject to an accreditation process, which will comply with a set of standards, including security standards, and accountability that are determined by the rules and regulators, also safeguarded by the statutory requirements mentioned above.

Also suggestions of Consumer education as to the success of the open banking process in which all participants play a role in consumer education.

Submissions have been made for the need of an internal dispute resolution process and an external dispute resolution process along with mandatory breach notifications and insurance options for any losses encountered by data recipients.

Is Open Banking International?

Yes. The UK and the European Union have implemented open banking since 2018, with various other countries following, such as the US and Singapore.

Why have open banking?

Open banking puts you back in control. Having better access to your data, allowing you to make more-informed choices about financial products that are right for you. It will drive competition within the financial sector, promoting innovation and allow new and better product services to be developed.

Thanks to Kylie Jay of Southern Cross university for assistance in preparing this article.

[1] https://static.treasury.gov.au/uploads/sites/1/2018/02/Review-into-Open-Banking-_For-web-1.pdf [2].

Liam Young