The Benefits of Open Banking for Australian Consumers

Benefits Of Open Banking

Open banking allows Australian consumers to share their personal & financial data with a range of major and non-major financial institutions. It has been heralded as the beginning of a new age in consumer data rights management – but will the benefits correlate with beneficial changes to the way banks & lenders add value to new & existing customers?

The Australian Competition & Consumer Commission (ACCC) has announced that Payble, the Open Banking platform which prevents late payments before they happen, was granted formal Consumer Data Right (CDR) accreditation. Payble is the first consumer payments app to receive CDR accreditation.

More competitive pricing for consumers

Open banking makes it significantly easier for consumers to shop around for financial products and services. Rather than having to call each lender individually & navigate through a range of call centres or visit comparison websites; consumers can give banks temporary permission to audit their financial history & risk profile. This will result in faster quotes & higher competition between lenders to win business without latency

Banks & lenders will be able to improve personalised offers for their customers based on their financial history, credit score and risk profile. This has the potential to significantly improve borrower-lender relationships – if used correctly.

More transparent financial products & services

Consumers will be able to see the benefits of switching from one lender to another in realtime. This not only makes it easier for consumers to compare finance providers but will incentivise existing providers to increase their breadth & depth of service to retain customers

Proactive versus reactive banking services

Today, consumers may be approached for a credit card increase or personal loan offer once in a blue moon however most need to approach their service provider should they need a new service offering. Banks then reactively respond to these requests & offer little in the decision making process.

Under an open banking model – banks will be able to proactively offer new or undiscovered services to consumers based on the data they have agreed to share. For instance, if a consumer with two children elects to share all account transaction data with a 3rd party financial provider & school fees increase over time – they may suddenly receive an offer to explore an education loan based on this proactive use of information

Increased bank account security

Open banking technologies are likely to make it more difficult for hackers to gain access to customer data . Data sharing platforms will allow financial institutions to monitor their own systems more effectively, and it is likely that open banking will prompt organizations to adopt new security measures.

Open banking could also improve the security of bank accounts by introducing a ‘challenge–response’ system across an array of customer owned properties to verify their customers’ identity. This differs from the two factor authentication (2FA) method used by banks today to validate users via SMS or app only when logging into their bank account.

In contrast, a ‘challenge-response’ event can be triggered whenever a breach attempt is made not just at login – with banks able to send out more complex questions than a randomly generated code or image which makes it harder for hackers to access an account i.e. How much was your last petrol bill.

In this way, open banking could make it harder for fraudulent transactions to be conducted via stolen bank details .

In order to protect sensitive information, Australian banks will need to invest in additional security measures such as encryption technology and more secure software development. A positive side effect of this increased security will be that customers can have greater peace of mind when using their bank accounts, knowing that they are less vulnerable to cyber attacks and fraudulent activity.

Improved customer service

There is a lot of potential for open banking to improve the quality of customer service. Not only will financial institutions be better able to target services at specific audiences but as manual burdens shift staff away from activities around manual account verifications & approvals – logic would suggest that call centre & support staff will shift to roles designed to promote customer loyalty in order to prevent customer churn in a highly competitive financial environment

More third party applications for financial management

Although banks were the first to benefit from open banking regulations coming into effect – as more data becomes available more companies will gain CDR (consumer data right) certification. This in turn will see the creation of apps like Payble giving consumers more control over their financial decision making

Improved financial inclusion

Financial inclusion is a measure of the access that individual consumers have to mainstream financial services such as savings accounts, credit, and insurance . Under the status quo – individuals like sole traders, casual works or SMES are excluded from mainstream financial products due to the unorthodox nature of their cash flows. More open banking will allow new companies to build innovative solutions for certain markets with transaction volatility.

Open banking will also make it easier for SMEs (small and medium enterprises), startups and non-profit businesses to scale up and reach new audiences.

Easier transfers between financial institutions

Currently, consumers who want to switch banks have to go through the tedious process of moving their money from one institution to another. This is known as ‘portability’. It is estimated that up to two thirds of Australians don’t transfer bank accounts because they are too busy or find the process too complicated .

Open banking should make it easier for consumers to move money at will – potentially leading to a number of non-major banks & lenders competing for consumer savings by offering promotional, high interest savings rates

Easier sign up for financial products

Under the current environment, there are many barriers that prevent consumers from signing up to new services. For example, people typically cannot access detailed statements or billing information or encounter laborious online/offline sign up processes

With consumers often forced to spend up to three months applying for certain products; worsened by endless paperwork; open banking will make it easier for consumers to sign up for these products by through automatically giving consent for financial verification in a matter of moments.

For instance, Payble allows consumers to sign up in seconds via a QR code on their bills or directly inside the billing portal of their favourite provider – evidencing the power of open banking in action to help consumers reduce the burden of payments

Conclusion

In summary, by reducing the need for manual account verifications, banks & 3rd parties will be able to offer personalized experiences that help people manage their money better than ever before.

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