Picture a future where your clients’ financial choices can be like selecting dinner options from a smorgasbord. A credit card with one financial institution, personal banking with another and their business lending with a third. Do they need a cash currency card for an overseas trip? They can choose any provider they want.
You’ll soon be able to have access to all their information pulled together and managed in just one place.
The banking revolution is gathering pace
According to KPMG, Australian fintechs are growing in diversity and scale. Developments in financial technology have proven a major disruptor to the mainstream banking scene, with the ability to tailor lending packages at competitive rates online that can be approved in hours rather than days.
The fintech fraternity have already established a successful connection between private investors looking to improve their returns and small businesses seeking cash flow and other funding over a short-term window. Investments, payments and lending are the fastest growing fintech subsectors, and there are more players in the market offering tailored choices for every situation.
Thanks to the development of online apps, your clients will soon be able to have all their banking information in just one place – and be able to share that information freely with advisors and those who need access to it.
Governments, both here and overseas, are moving legislation to make this possible with the U.K. developing a set of standards around privacy and security that are expected to be in place from 2018. The U.S. and Australia aren’t far behind.
So, what is open banking?
Thanks to application programming interfaces (API) technology already in existence, app developers will be able to develop apps that will interact with banking data through an open banking API. Once these interface technologies are in place, it seems likely there will be an explosion of apps developed, performing a whole range of tasks designed to make your clients’ banking easier.
A number of apps are currently underway to help people manage their money across multiple platforms. International companies such as Pocketbook, Yolt, Tandem and Wave are developing apps to manage multiple banking providers in one place. DueDil will provide users with an ability to prove their financial credentials and will have the ability to draw up to date information from a variety of client banking sources online.
Information can flow to those who need it
It’s in the area of sharing online banking information where many of the greatest benefits will be seen. Your clients may already sync data automatically between their current banking provider and you through software such as MYOB and Xero. This is much like a restaurant where the waiter (the software) liaises between the customer, and the chef (their bank).
Open banking is going to be more like Uber Eats, where the software will have the ability to provide data (meals) from a variety of banks (restaurants) as you and your clients require it. They will have permission to collect their ‘financial data feasts’ from wherever they want and deliver them to whomever they want to have them. They will also be able to provide you with full or restricted access as well.
Soon, apps will enable your clients to draw data from multiple banking sources, ensure it is up to date in their accounting system and send relevant information off to you and their other legal and financial advisors whenever they require it. You’ll be able to view data across several different banking sources in real time.
The real-time availability of this information will go a long way towards identifying opportunities your clients can take advantage of or trouble spots to plan for. It’s not a stretch to think that this could usher in a new era of predictive cash flow management.
Australian banks are repositioning themselves for the change
The large banks have seen the potential of this and realise it is going to be a game changer for the financial services industry. Macquarie Bank has spent more than $470 million over the past two years developing Australia’s first open banking app. The app will allow clients to share information with fintech firms, accountants and budgeting software quickly and easily.
Macquarie’s stance demonstrates that banks are no longer as resistant to the arrival of fintech competition and are willing to embrace the new environment of open banking where data sharing will become the norm.
As the fintech space continues to grow, it seems as if the only limits with what open banking can do fall within the limits of human imagination.