By Louisa Sanghera, Director, Zippy Financial
Open banking is here and it’s charging full steam ahead. How are lenders and fintech’s using your shared data in this brave, new, data-fueled world?
With everything that has gone on over the past two years, one of the nation’s biggest banking overhauls in recent memory has slipped under the radar. It is called ‘open banking’ and it aims to allow you to share your banking data easily and securely with your bank’s competitors to make it more convenient for you to switch banks when you think you have found a better deal on a financial product.
For example, instead of spending hours and hours gathering documentation (such as bank statements, expenses, earnings, and identification documents) to refinance your home loan, you could simply request that your current bank sends the information across for you. But, like most things, it comes with a trade-off – you have got to share your banking data with the prospective lender, fintech or allied professional to make it happen.
So, how do they use your data?
Australian open banking provider Frollo has published the second edition of The State of Open Banking 2021, which surveyed 131 professionals representing banks and lenders, fintech’s, technology providers and brokers across the country. The report shows open banking data availability has accelerated dramatically.
In the first 10 months of 2021, 70 banks started sharing consumer data and 14 businesses became accredited data recipients, including three of the four big banks. This is an increase from just five data holders and five data recipients in 2020. And more financial institutions are getting ready to jump on board.
The industry survey shows 62% of respondents plan to use open banking data within the next 12 months, and 38% within the next 6 months.
So, what are they using the open banking data for?
Well, the most popular uses can be grouped into three categories:
1. Lending: income and expense verification is highly valued by 59% of survey respondents.
2. Money management: multi-bank aggregation and personal finance management were highly valued by 50% of respondents.
3. Verification: customer onboard (49%), identity verification (38%), account verification (34%) and balance checks (30%) were all highly valued.