Open Banking is set to be adopted by Australia’s big four banks (CBA, ANZ, NAB and Westpac) in July of 2019. This process of secure data sharing between financial institutions has already been implemented in Europe and the UK, with varying results. But what does it mean for Australian consumers and financial advisers?
What is open banking?
Open Banking involves the secure sharing of an individual’s financial data between institutions. It has been introduced to prevent one organisation from ‘owning’ an individual’s data and keeping them from easily accessing other financial services. For example, with Open Banking in operation between Australia’s prominent banks, it will be simpler for consumers to change banks, explore competitive credit card deals or gain tailored financial advice from a third party provider. But Open Banking does not promote a completely open data system. Consumers control who can access their financial data and a bank or institution cannot share a consumer’s data without their express permission.
What does it mean for Australian consumers?
Consumers have more freedom to choose their financial advisers.
The Australian public no longer has to settle for lack-lustre financial advice from their bank. Many consumers have little choice but to seek financial guidance from their banks because these institutions have the best access to their economic history, records and general data. But there have been many cases where big banks have their fingers in too many pies and, as a result, some services fall by the wayside, including financial advice. Open Banking will level the playing field between banks, fintech and financial advisers. The system will provide better access to clients records for third-party financial advisers and money apps, meaning that there will be increased competition and enhanced services. Open Banking in Australia aims to cultivate higher quality financial services for consumers.
What does it mean for Australian financial advisers?
Financial advisers gain better access to client financial data.
With these positives in mind for Australian consumers, competition is at the forefront of all financial advisers minds when considering the introduction of Open Banking. It’s more important than ever for financial advisory practices to be on top of convenient fintech solutions. Consumers will also be looking to financial advisers with a reputation for embracing innovation. Open Banking will develop a platform from which financial advisers can provide enhanced advice based on their client’s economic history and records across multiple banks and accounts. More personalised financial counselling will be achievable. Furthermore, the processing of client data will become faster and more streamlined, if the financial adviser is connected to banks via a secure and efficient API. With Open Banking, financial advisers can give financial advice based on specific data, ensuring more accurate projections and strengthened planning actions for their clients.
Financial advisers will have to work harder than ever in 2019 to stay ahead of their competition. With the introduction of Open Banking, financial advisers will be vying for new clients that have a wealth of choice at their fingertips. If your financial advisory practice needs to update systems to make the client onboarding process more efficient, now is the time to do so! Contact AdviserLogic today to discover how our financial planning software can create custom solutions for the enhancement of your services.