What’s going on guys Its Jordan de Jong here and today I want to talk about open banking when it's coming into play, what it means when all our customer data is shared between financial institutions and how it’s going to impact lending in the property market. Open banking is going to give you more control over the data that lenders hold on you and will allow you to ask that your data be sent to other lenders. Whether this is a good or bad thing we’ll get into but essentially there’s no more hiding financial statements, bank accounts between multiple lenders and every single transaction will be accounted for. Open banking in Australia is free and there are four categories of data that will be shared, including Product data, Customer Data, Account Data, and transaction data. Product data is information about interest rates, fees and features of the product, Customer data is your personal information such as email and home address, Account data includes your specific accounts, their balances, direct debits, and regular repayments, and transaction data represents all the transactions from your accounts, including how much you spend and what you spend it on. On the 1st of Aug 2019, Open Banking Legislation was passed by Australian Parliament which requires the Big Four banks to provide access to this data in two phases, customer, account and transaction data will be shared from February 2020 followed by Mortgage and offset data in phase two being released July 2021. Non-Major banks will also have to provide this data, they do however have a little more time to get everything organized, the two phases will be released exactly one year later, with phase one due in February 2021 and phase two due in July 2021. So, depending on who you bank with, from these dates you will be able to request your data and ask for it to be sent to another Authorised Deposit-Taking Institute (ADI) or third-party company, as long as they are an accredited to have your data. The main goal here is for banks to use this data to provide tailored products and services based on your financial situation, essentially it's less privacy for us and more exposure for the banks to sell you another product you don’t need such as a credit card or some type of personal loan. It also means all of your spending habits in minute detail will be fully exposed to any bank or company you choose to share your data with, so hopefully, its less of a sales pitch for another credit card and more of a we can’t approve you for this credit card because of your recent spending habits. This isn’t the only recent change to expose our banking habits, since the 1st of July 2018 comprehensive credit reporting came into play where banks where required to share positive credit events, such as regular payments, previously only negative credit feedback was reported such as a missed payment. The positive side to open banking is the whole loan application process will be a lot more automated now, currently and historically all financial statements had to be provided anyway, but with data being shared in the same or similar format, the banks will have certain criteria that pre-determines if your loan is approved or declined, hopefully with a significantly less wait time. This goes for all other products and services too, banks will propose the best solution that suits our financial circumstances and should make switching between banks for any product or service much easier and faster as all our customer data has already been shared, this should encourage competition between the banks as switching has never been so easy. You will also be able to direct your banking data into a budgeting app that will help manage, categorize, track and optimize your money, allowing you to make better and more-informed choices before buying those new sneakers. This will drive innovation in the financial sector, hopefully, to help you save money rather than spend it. On top of this, and I don’t know if this is something they are trying to sell us on to make us feel more comfortable with sharing our data, but we may be able to lock in a more competitive interest rate based on good financial habits as banks will compete for customers with cleaner financial records. This is both a blessing and a curse, for those with clean records getting a better product and a lower rate will be a breeze, however, for those already struggling financially or can’t shake bad spending habits, it will make it even tougher for them to get financially ahead without 3-6 months of cleaner records. Obviously sharing very personal data is a little concerning for everyone and holding individuals ransom because of their historical transactions isn’t a fair predetermination, especially with automated declines being issued based on this data. As if it wasn’t hard enough for people seeking home loans already, banks are now using a fine-tooth comb to go over our spending habits to ensure we can make the mortgage repayments, and with opening banking, everything is fully exposed. This may also lead to more cash transactions for people who can’t shake bad spending habits, maybe this why in the 2018-19 Budget, the Government announced it would introduce an economy-wide cash payment limit of $10,000 for payments made or accepted by businesses for goods and services. Ultimately, the biggest concern is the safety of the data now being shared, anyone participating in open banking will need to adhere to strict security standards when accessing and storing data and will be subject to the privacy act. But don’t forget these organizations have access to your data at your request and from there do what they want with it internally. For the property sector specifically, hopefully, open banking drives home loan package competitiveness, streamlines the pre-approval process for new home loans and pushes innovation through budgeting tools, mortgage repayment calculators and property planning models. If opening banking is used for good, to help people already having financial struggles to get back on top, instead of ramming another personalized credit card package advertisement into their inbox, then I think open banking will be a benefit to Australia. As always, seek your own professional financial, legal & property investment advice for your current situation, these blogs are just my opinion and general in nature and should never be considered personal advice. Until next time, happy house hunting.

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