If you have a bank account in Australia, you just got a whole lot more powerful. In the 2017-18 Budget, the Australian Federal Government released a number of changes to the financial industry. One of the most significant is the shift to an “open banking” system.
Open banking has made its way into budget plans and financial legislation all over the world. In Australia, the beginning of the next fiscal year means consumers will be able to request their data to be shared with rival financial institutions, allowing them to directly compare services, pricing, and more. The goal is to create a more competitive finance industry by giving consumers more control over their data and enhancing their ability to make informed choices about where they bank.
The move to open banking also removes a lot of barriers for companies hoping to enter the financial sector. Third-party organizations and fintech startups now have an incentive to bring more innovative products and services to market.
While Australians lead the world in digital banking, with 38% of banking interactions occurring on a mobile device and 35% occurring online with other devices, it is not the first country to introduce open banking (The Sydney Morning Herald). The UK recently adopted a similar system and the EU has also drafted legislation, PSD2, setting the stage for open banking across Europe.
As banks affected by these changes scramble to build and test APIs to securely share consumer data, experts predict a complete overhaul of the finance industry—and sooner rather than later.
“The short-term impact will take a bit of time to settle down, but the long term will be quite significant, and in five to 10 years we will be in a new ecosystem," says Saket Jasoria, Head of Digital Strategy at Lloyds Bank Group (Financial Review).
As open banking makes its way into financial systems worldwide, we will also see a concerted effort from banking institutions to create a better online experience to retain and attract customers. With consumers’ newfound power of choice and the competitive edge of innovative fintech startups, the ease and credibility of digital money management is more important than ever.
How do you think open banking will change the way financial institutions manage their digital presences? Talk to us in the comment section below.