Open banking is coming – What is it and how will it affect you?

Open banking is on the way, and it’s important to understand this international movement which could dramatically change the way your customer data is shared.

The way that you manage your banking has long been all about, well, the banks. Now, open banking could represent a complete shift. This global movement represents a set of proposed regulations, all designed to offer you more choice in how your financial data is managed and accessed. Open banking is all about Banks sharing customer’s data with third parties if the customer requests this.

Traditionally your money sits with a bank, and they hold your customer data. For a lot of people, this system works just fine, it’s what they’ve always known and they are comfortable with it. Others might not be so happy with the fact that some banks have been slow to offer a full suite of digital services.

Open banking offers you the choice to give access to a third party product or service, such as an app, to use your data in a way that you want. Under open banking, payments could be triggered by these apps or platforms. For example, you could give a personal finance app permission to make a bill payment directly. The innovation is all about increased competition and choice but there are obvious protection and security issues.

In some parts of the world, open banking regulation has already begun. The Payment Services Directive 2 (PSD 2) is already improving payment efficiency across Europe. Mandated changes are coming to Australia and NZ is following with a pilot programme launched by Payments NZ. From 1 July 2019, Australian banks must allow customers greater access to their transaction data.

It’s a good time to consider whether you want to use ‘third party’ services with your bank account. Currently, there are a number of different companies who want to use your banking data in a way that works for you. Now, as banks are being asked to comply to make this easier, your options will open up even further, as new financial services and ‘neo-banks’ are brought to the market. It’s an exciting time, but remember that your data is valuable. With any new service or app, it’s important to clearly understand and be comfortable with the Terms of Service (ToS) before allowing any access to your data.

For any questions about managing your money, talk to your accountant first.