What is Open Banking and what does it mean to me?

What is Open Banking and what does it mean to me?

One of the first events of the new financial year is the launch of Open Banking, which promises to make it much easier to compare financial offers and switch banks. But what is Open Banking, and does it live up to the hype?

What exactly IS Open Banking?

To talk about Open Banking, you first have to talk about the Consumer Data Right (CDR). This project from Australia’s federal government gives everyday Aussies the right to share digital information about themselves with organisations of their choice, to help make more accurate comparisons while minimising paperwork and keeping their personal details secure.

First announced years ago, Open Banking is the first implementation of CDR in Australia. From July 2020, Australians can request their bank share their data for deposit and transaction accounts, as well as credit and debit cards. And from November 2020, Australians will be able to share their data relating to home loans, investment loans, personal loans and joint accounts.

While CDR is initially being introduced in the financial industry as Open Banking, there are plans for it to expand to other industries in the future. This could make it easier to compare and switch energy providers, telecommunications services, and much more.

How does Open Banking work?

Traditionally, to apply for a new savings account, credit card or home loan, you’ll need to fill out a lot of forms, send through copies of your ID, sign a lot of papers, and generally jump through a lot of bureaucratic hoops. While online application forms and electronic signatures have smoothed these processes in recent years, it still involves a lot of hassle. And because the exact cost and value of a financial product may vary depending on your personal financial situation, there’s often a lot of estimates and assumptions involved when comparing different offers.

Under Open Banking, you can choose to make part of your personal financial information available to a new bank. Using the bank’s website or app, you can choose exactly what information you’d like to share, how long you’d like to share it for, and how you consent for it to be used. You can change or withdraw your consent if you choose.

This information lets banks find exactly what they need to make you a competitive offer using real data, without having to make estimates or assumptions, and without having to drown in seas of paperwork. This can make comparing and applying for different financial products much quicker and easier than it was in the past, while also keeping your information secure.

According to the Australian Banking Association (ABA), data you could choose to share with Open Banking includes:

  • Personal: information such as phone number, email and address.
  • Account: balances
  • Product info: rates, fees and features of bank products
  • Transaction details: amounts spent

What are the benefits of Open Banking?

Open Banking has the potential to make it much easier to compare financial products and switch to a better deal.

According to the ABA, some of the future benefits of Open Banking could include:

  • Signing up more easily for new credit or debit cards
  • Getting a loan easier
  • Using budgeting tools that let you track and plan your spending
  • Switching from one bank to another bank more easily

Instead of comparing many different products to estimate the value they could offer, then filling out forms confirming your identity, income, expenses and much more, you could make part of your banking data available providers, so they have easy access to all the information they need, with no extra effort from you, and you can calculate and compare the exact costs and benefits of their services. 

Additionally, rather than applying for financial products that you may not be qualified for, you may be able to ask banks and fintechs for financial products that are tailored to your financial situation.

Rather than using photocopied account statements and credit reports to give the bank a general idea of how you manage your money, you could choose to show the bank your current financial records so they can see for themselves. The bank could then use this information to offer you a personalised deal that could provide more value.

Additionally, because it’s much harder to “enhance” your income or expenses when you give a bank access to your finances, it should be much harder for risky so-called “liar loans” to slip through the net.

What are the risks and drawbacks of Open Banking?

One of the main concerns about Open Banking is the security of the personal information you choose to share with banks and fintechs.

Open Banking is only available to organisations that are accredited with the Australian Competition and Consumer Commission (ACCC) and publicly listed on the CDR website. These organisations are required to use sophisticated information security measures to keep the data you choose to share with them private.

You can choose what data you share with these banks, and how you consent for this data to be used, but you must still trust these organisations to handle this information responsibly and keep your data safe.

Also, because accreditation is required to be part of Open Banking, not a lot of banks are participating in it at this early stage. In fact, on day one, Australia’s big four banks – ANZ, Commonwealth Bank, NAB and Westpac – are listed on CDR as Data Holders, while only Regional Australia Bank and fintech Frollo are listed as Data Recipients. This could mean your options may be limited when you’re looking for financial products through open banking.

However, according to the ACCC, a further 39 providers have already begun the process to become accredited data recipients. And with the next phase of Open Banking due to go live in November 2020, the way Australians search, compare and apply for financial products could be due to change.

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Learn more about bank accounts

Can foreigners open bank account in Australia?

If you’re migrating, studying or working in Australia, you’ll be pleased to know that you can open an Australian bank account. For the most part, opening a bank account in Australia is a simple process which starts by comparing the types of bank accounts foreigners can open in Australia.

Once you’ve found a bank account that suits your needs, you can start the application process.

When you apply for the account, you’ll need to provide proof of ID which may include your passport, overseas ID or credit card. You may also need to provide a copy of your visa and proof of address in Australia.

Depending on the bank and the type of account you choose, you may be able to apply for the account online or over the phone before you arrive in Australia.

What do you need to open bank accounts?

Opening a bank account is one of the simplest online tasks you could perform. The hard part is deciding which type of bank account you want to open.

All banking institutions have a website where you hit ‘apply’ on the account of your choice and step through an application in less than 10 minutes.

Here’s a list of information that is generally required for applications.

  • Identification (driver’s licence, passport, proof of age card, proof of citizenship and/or birth certificate)
  • Tax file number (so you don’t get charged the highest tax rate)
  • Address, contact email and phone number

If you decide to open a new account at the branch, make sure you ask beforehand what information you need to take with you, or take all of the above to be safe.

How long does it take to open a bank account?

The length of time it takes to open a bank account varies, depending on whether you want to open it online or in person.

Online

Most banks and credit unions have simple online applications that usually take no more than 10 minutes to fill out. It can be especially fast if you have your identification documents like your driver’s licence and passport handy. Sometimes you will instantly be approved and the bank account opened. However, depending on the financial institution, it may take a day or so to be processed and your account number issued. Your account information and ATM or debit card will then be mailed to you, which usually takes between five to 10 days.

In person

If you decide to go into a branch or office to open a bank account, it may take about half an hour. Make sure you bring your identification documents with you. Also book an appointment if you can, otherwise you might be forced to wait in line. Sometimes your ATM or debit card will be issued on the spot, otherwise you’ll need to wait for one to arrive by mail, which usually takes between five to 10 days.

How do I open a bank account for a baby?

If you’ve just welcome a new baby into the world, congratulations. Opening a bank account for your child can be a wonderful first gift.

Before you can open your child an account, you’ll need to have a birth certificate or passport for your baby.

As the parent or guardian, you’ll also be listed as a joint holder on the account. This means you’ll need to have proof of your identification and address (a driver’s licence, passport, birth certificate or Medicare Card).

Many banks and credit unions offer baby banks accounts. Usually, you can apply online; otherwise you can head into a local branch or office with your documents.

Can I open a bank account in another country?

Despite having a bad rap for facilitating tax evasion, it is possible and legal to open a bank account in another country, also known as an ‘offshore account’.

Some people choose to open a bank account in another country to invest overseas, for higher interest-earning potential or to access foreign banking services.

The process for opening an offshore bank account differs depending on the financial institution and country in which you’re opening the account.

Typically, you will need to provide identification such as a passport, a local bank statement and a signed declaration proving the source of the money being used to open your account. Usually, deposits into offshore accounts can be made by international money transfer.

Can you open another account at the same bank?

Yes, you can open another account at the same bank if you already have an account there, but some banks place a limit on how many specific accounts you can open.

Generally, though, it is possible to have more than one everyday account, one personal account and one joint account, or have different types of accounts – such as a transaction account and a savings account.

Keep in mind that some bank accounts come with fees, so you could be charged twice for having two types of the same account at the same bank.

Also, if you have more than one high-interest transaction account at the same bank, only one account will be able to earn the highest rate of interest.

How do I open a bank account for a child?

There are few better ways for a child to learn about money management than through savings. And there’s a plethora of bank accounts designed specifically for young people and children.

A bank account for a child can be opened online, over the phone or in a branch in a few easy steps. The minimum age a child can open a bank account for themselves usually ranges between 12 and 14.

If the child is too young to open the account, you can do it for them as their legal parent or guardian. 

To do this, you would need to be over 18, have an Australian residential address and currently reside in Australia (or have proof of residency).

You would also need to provide:

  • Identification for yourself and the child
  • Your tax file number (TFN) or TFN exemption

Depending on the bank account, you might be able to choose what level of access the child has to their bank account (online and via the phone).

How can I check my bank account balance online?

Checking your bank account balance online is a simple process. Once you’ve logged in to your online banking, clock on the relevant account and the balance should be visible.

Can I start a bank account online?

Yes, most lenders that operate in Australia will let you set up a bank account online. The process is usually simple and takes five to 10 minutes. You will probably need to provide a passport or birth certificate, as well as a driver’s licence, Medicare card or another form of secondary identification. Requirements differ from lender to lender, so some institutions might ask for more or different forms of ID.

Can a debt collector garnish my bank account?

A debt collector can garnish your bank account, but only with a court order. This drastic action is usually taken only if you’ve ignored several notices asking you to pay the debt.

If this happens, there is nothing you can do to stop it other than immediately pay back your what you owe in full or make arrangements to pay it off in installments.

Once a garnishee order is issued, your bank will put a freeze on your account as it processes the order. This usually takes two to three days and you won’t be able to access any of your money during this time.

If you have Centrelink payments, they may be protected, depending on what the court order says.

Can you find your bank account number online?

If your bank offers online services, you should be able to find your bank account number online by logging into your account on your bank’s website and checking your details there.

Keep in mind that each type of account you have with a bank comes with a unique account number. This means if you have a bank account as well as a savings account, for example, your bank account number and your savings account number will be different.

If you don’t have access to your bank account online or can’t login, you should be able to find your account number on a mailed bank statement, if you have one.

Alternatively, you can call your bank’s customer service number or visit a branch to retrieve your account number.

How do you open a bank account under 18?

If you’re under 18 and you want to open an Australian bank account, you will need your passport or birth certificate. (Some lenders might require just a Medicare card or driver’s licence.) You can apply online or at a branch. If you’re 13 or under, you will probably need a parent to accompany you to a branch.

How do you open a bank account in Australia?

Opening a bank account in Australia is usually a straightforward process. Some banks give you the option of opening an account online, while others require you to visit a branch.

Different bank accounts offer different features, so it’s best to compare your options to find one that suits you.

All banks require you to pass an identity check to open a bank account. Australia uses the 100-point identification system, which means you’ll need to show a number of forms of ID that, together, add up to 100 points.

Common ID types include a driver’s licence, passport, Australian visa in a foreign passport, and Australian Medicare card. You’ll find out what types of ID are accepted when you go through the sign-up process online or at a branch.

Once your account is open, you’ll be given or sent a debit card that you can use to make purchases and withdraw money from your account.

Can Centrelink access your bank account?

Yes, Centrelink can access your bank account, but only if you give them a reason to. Centrelink uses data-matching software with other federal government agencies to help it crack down on welfare cheats.

This is why it’s important to give true and matching information to all government agencies.

For example, if you report to Centrelink your annual income is $25,000, but at tax time you report your income as $50,000 with the ATO, it’s likely you’ll be ‘red flagged’.

At this point, Centrelink can legally request that your bank hand over your personal bank account details, to review your finances.

In most cases, Centrelink does not have the authority to take money out of your account. You will usually be given written notice to repay the debt.

However, Centrelink can also reduce your benefits until you’ve paid back what you owe. In extreme cases, Centrelink can garnish your wages and assets (including money in your bank account) until your debt is repaid.