Open banking is a new development in the Australian business landscape and AICM National Partner illion has recently purchased financial data aggregation fintech Proviso. With so many questions on open banking we thought we’d ask Proviso CEO Luke Howes to write an article that explains this exciting development and get into the detail of what
open banking means to the credit profession.

Open banking gives consumers more control over their data and presents a clear opportunity to implement a government supported and regulated national framework that will build trust and confidence in increased data sharing. Open banking will enable us to have direct relationships with the major banks, which will expand our product offering to more customers and build even more trust in the broader fintech ecosystem. 

The benefits to brokers and consumer credit providers are widespread. More efficient use of time and resources through frictionless technology; improved risk assessment  through categorisation and analysis of income and expenditure; and now that Comprehensive Credit Reporting is gaining momentum, credit professionals will have access to a more complete picture of an individual’s financial position, enabling them to better fulfil their financial lending obligations. Proviso’s platform is able to extract 180 days of bank statement information in a matter of seconds.
Otherwise this is a cumbersome process of printing, scanning and uploading bank statements. We provide a frictionless service that delivers income and expenditure data to brokers and lenders on behalf of millions of customers each year. 

Demystifying open banking – questions you may have 
What is Open Banking? 
Open Banking enables consumers to securely share personal financial information with approved financial institutions and third-parties besides their account holding bank, opening up opportunities to get better deals on mortgages, overdrafts and comparing insurance and broadband deals. 

How does it work?

Open bank application programming interfaces (APIs) enable approved third parties to develop applications and services based on the data held by financial institutions.

What is the size of the Open Banking market in Australia?

The Open Banking market in Australia is still in its infancy, with just a few dedicated API platforms working directly with  individual banks. In July 2017, Treasurer Scott Morrison commissioned an independent company to model how the  government could implement an Open Banking regime in Australia. The Australian Open Banking Review, which provides  advice on the design and implementation of Australia’s Open Banking system, was released by Scott Farrell in February  2018. 

What are the big banks saying about Open Banking?

There is currently no consensus among the major lenders on Open Banking, with some backing open API fintech platforms in a bid to prepare for any change in regulation, while others have adopted a ‘wait and see’ approach to sharing their data.

The big four banks currently hold the vast majority of retail banking data on Australian individuals. Open Banking would see  this data shared with a much larger group of mid-tier  and alternative lenders, resulting in more products and services,  and more competition. 

What are the benefits of Open Banking for consumers?
Consumers have greater control of financial data and are able to choose who can access it, what information is shared and  for how long. There is no obligation to use Open Banking services; it is just another option for consumers.

Increased information sharing provides consumers with greater bargaining power to secure better deals on a wide range of  products, from mortgages, credit cards and insurance to utilities, mobile phones and internet services. 

Financial data  can also be shared with budget planning and/or financial advice services and applications, improving an individuals’  capacity for financial management and planning. 

What are the benefits of Open Banking for consumer credit  professionals?

Consumer credit professionals are able to make more accurate risk assessments and fulfil responsible lending obligations through access to more comprehensive data on consumers and their ability to take on and service debt. 

Businesses are able to reduce risk and offer more competitive deals to more creditworthy customers.

What is happening globally? 

Open Banking regulations came into effect across Europe in January and in the UK on 13 January 2018,  with a roll-out completion date of March 2018. 

Under the new UK rules, the nine banks with the largest market share are required to adopt and maintain common API standards through which data can be shared with other lenders and third parties.

Of the nine UK banks are required to comply with the new Open Banking rules. Lloyds Banking Group, Nationwide, AIB Group and Danske met the 13 January deadline. Barclays, HSBC, RBS, Santander and Bank of  Ireland have been given an extended deadline to begin sharing information. 

Open banking, in various forms, is also  underway in China, the United States and East Africa. 

Consumers have greater control of financial data and are able to  choose who can access it, what information is shared and for how long.