A huge change is already underway in Australia’s banking sector. And, in January, consumers and businesses can finally experience some of its benefits first-hand, writes Steve Kemp, Head of Financial Institutions Partnerships APAC and Emerging Markets, Intuit.
Since last year, regulators, Australia’s Big Four banks (NAB, Commonwealth, ANZ and Westpac) and a test working group of data recipients have been piloting open banking in Australia. To ensure diversity in the pilot program, the test working group ranges from young digital banks and fintech start-ups to long-standing companies like Intuit Australia, who also participated in the United Kingdom’s 2018 roll-out of a similar scheme.
In February, you’ll be able to consent to a financial entity securely sending your personal or business information to an accredited data recipient of your choosing. But what does that look like in practice and why does it matter?
Let’s start with what “open banking” means
Open banking refers to the first roll-out of the Consumer Data Right legislation that passed last year, a government- and regulator-led portability scheme affording Australians greater control over how their data is used and disclosed within a variety of industries. In banking, this will enable you to request the transfer of your financial data to banks, financial institutions and other accredited data recipients, sharply contrasting present circumstances that can make it hard to access or transfer all of your financial data.
Starting next month, open banking requires the big four banks to provide access to a large portion of this financial data. With staggered requirements throughout the year, the big four — and, eventually, all banks — will need to provide access to product data, customer data, transaction data and account data.
Perhaps the best part about open banking is that there isn’t much you need to do and it won’t cost you anything. Those of us in the pilot program have been collaborating and applying lessons from the UK’s roll-out to refine the necessary systems and ensure a smooth experience for end users.
Here are three ways in which this new landscape can help with running a small business.
Better, faster accounting and financial management
Whether you manage your business finances yourself or work with an accountant, open banking could reduce the time and resources you spend on financial management.
For instance, software like QuickBooks requires customer data from your bank, and we currently rely on disparate methods of receiving this data. There’s no immediate access and some methods aren’t as secure or may require additional maintenance.
Because of open banking, the big four banks will surface data through a standard called application programming interface (API) — in plain English, that means data will be available in real time and sending it will employ stronger security protocols than most historical methods.
To put potential benefits into numbers, less than 70 per cent of transactions on the Intuit software are auto-reconciled through bank feeds. Now that data will be available via APIs, that rate could rise to 100 per cent, saving small businesses and accountants between eight to ten four and six hours per week
Over time, open banking might also mean that entities like banks or insurers can involve you less in administrative tasks, such as verifying your identity, while still maintaining strict security protocols. Put simply, financial management and accounting will start to become faster, easier and more secure.
Richer financial insights for your business
Better data often means better insights. And better insights often mean better business decisions.
In the UK, open banking has already fuelled budgeting apps that help consumers automatically track and optimise their money. Similarly, better access to data can help small to medium-sized businesses manage their finances more quickly and accurately.
Companies like Intuit will be able to support their products with deeper, broader data sets, which can help small business owners get accurate, real-time insights into their finances and cash flow. Open banking will also make it easier for software vendors and accountants to better leverage machine learning and artificial intelligence. As time goes on, we may start seeing digital banks provide these sorts of services and other new banking practices that could benefit small businesses.
Greater choice in providers
Have you ever thought about switching to, say, a different bank? Have you ever felt uncertain about which product, provider or lender is right for you? Choosing a product or service is often confusing, and switching providers can be a massive headache since all your information lives in one place.
Whether you’re confronting these questions as an individual or a business (or both), open banking will make it easier to switch from one provider to another and easier to decide which path is right for you.
Through open banking, you can share your financial data with a new provider or lender and switch to a better deal more seamlessly. Plus, by directing an institution or bank to share your information with a third party, you can get information about products and services tailored to your own financial circumstances.
Empowering people with greater control over their own data is a promising way to head into a new decade and is likely to encourage innovation, competition and financial understanding — a win for small businesses and consumers alike.
This article was written by Steve Kemp and was first published on www.kochiesbusinessbuilders.com.au.