Open Banking to revolutionise broking
Open Banking is coming … but what is it and what will it change?
Open Banking will hand the financial identities of customers back to them. Consequently, they’ll be empowered to make comparisons and decisions about their money, more easily.
Until now, banks have hoarded this data. It’s created a closed, protectionist environment where customers have been deprived of financial mobility as a result.
If a customer wanted to explore options with another lender, they – and their broker – have had to jump through hoops to access the required information.
But from February, that’s all changing. Removing the hurdles to accessing data will help customers compare products and switch providers, if they wish. It will also create greater competition amongst lenders.
Open Banking presents great advantages for brokers: easier collection of data, heightened accuracy, and shorter times to lodgment … GAME CHANGER!
But if you don’t have an aggregator supporting you with innovative tech infrastructure*, you won’t enjoy the full benefits of the new financial landscape: no enhanced customer service, no streamlined experience and no added opportunity for growth.
What’s been the driver for Open Banking?
Open Banking isn’t new. It’s been part of the world’s largest economies for several years, driven by the operators in the financial sector themselves.
Australia’s banks, on the other hand, sat back and watched. Their disinterest prompted the Australian Government to reach for the big stick, developing the Consumer Data Right (CDR) legislation.
It all started in 2007 at the hands of Prime Minister Scott Morrison, Treasurer at the time. The PM believes the introduction of Open Banking heralds the ‘age of the customer’. He even appointed a Federal representative for ‘fintech’ to make good on his prediction.
The Government brought in the CDR to provide more choice for customers and create more competition.
From February 2020, the Big Four banks must enable their systems for Open Banking. Just as its name suggests, the legislation requires banks to make customers’ data – their savings history, spending patterns, loan repayments, income, assets owned, products owned and used and more – available to them.
What are the benefits for brokers?
Customers are first and foremost the beneficiaries of the CDR with improved choice and competition.
But with this newfound access to data, who will customers share their information with?
Deloitte Access Economics recently surveyed more than 2000 people on the topic of Open Banking ahead of its implementation.
The results found:
- 65% of respondents reported trust was pivotal to sharing personal information;
- People were ‘three times more likely’ to share their data with an ‘accredited third party’.
One of the most encouraging pieces of news to come out for brokers in the last 12 months was that customers are more likely to choose brokers ahead of banks for the best mortgage outcomes. Customers trust brokers to do right by them.
Open Banking creates a victory for brokers in numerous ways:
- It recognises that customers’ banking and expense data belongs to them and not the bank – A HUGE VICTORY FOR BROKERS AND THEIR CLIENTS!
- It will create competition amongst lenders, encouraging customers to explore new options. Guess who they’ll ask for help?
- It establishes a global set of technical and security standards that make it easier and safer than ever before to share data.
But to take advantage of the full opportunities, you need to be a digitally savvy broker.
The Big Four are, right now, preparing to lift their shutters for February.
At the other end of the chain, aggregators are readying themselves to better service their customers in the new financial world. With digital infrastructure playing a pivotal role in the application of Open Banking, it’s important to for brokers to have aggregator at the forefront of the tech revolution to take full advantage of the new era of business.
You need an aggregator with tech solutions that can segregate and analyse data so you can provide insights to customers that prove your value, create results, and position you for new business.
Will the CDR extend beyond financial services?
There’s already plans to introduce it to the energy sector.
In short, tech answers the demand for comparison and creating competition.
Insurance is an obvious option for application: indeed, the Government’s already flagged it. For brokers who are part of an aggregator that advocate a Trusted Advisor philosophy – providing solutions to customers across their breadth of financial needs, not just mortgages – this presents massive opportunities for growth.
Making Open Banking work for you
If we haven’t seen it already, Open Banking will certainly signal the death of ‘pen and paper’ broking.
For all the benefits that Open Banking will deliver, brokers need to ensure they’re digitally ready for its arrival. It’s too complex and expensive to try and navigate it on your own.
Customers want to win back their financial identities. They’ll want to use their own data to explore new options. And they’ll want experts with the knowledge of products and policies to help them utilise their data for better outcomes.
To prepare yourself to make the most of Open Banking, find an aggregator who is ahead of the tech curve.
*Loan Market was named Technology Platform of the Year at the 2019 Australian Broking Awards.