MichelleBaltazar BANKIN
Open the way to a better deal
A delay in the rollout of the new banking regime gives small business owners
more time to organise theirfinances
Forexample,oncetheappuserhas
sharedtheirbankingdatawithAsto,it
allowstheapptoapplyalgorithmstogive
thema bettersenseoftheircashflowand
debtprofile.Suchanappwouldn’tbepossi-
blewithoutopenbankingandNichollssays
youcanexpectfintechsolutionslikeAsto
tostartpoppinguponourshoresnextyear.
Australianscanalreadyspeedupbusiness
loan approvals today – but at a cost: unlike
the open banking platform, where they
share their “metadata” with an authorisedS
tarting in July next year, small busi-
ness owners will have a new ace up
their sleeves to combat day-to-day
cash flow problems. Under “open bank-
ing”, small business owners will be able to
authorise their bank to share their banking
data, such as receipts, payments and trans-
actions, with approved financial institu-
tions and comparison websites.
Small business owners can benefit from
this in two ways: it will allow them to find
out if their bank provides them with the
best lending and cash rates and, if not,
which institutions they can switch to.
Of course, this can be done today but not
seamlessly. Most business owners don’t
have the luxury of time to shop around or
switch finance providers. But under open
banking, they can move their loans from
one provider to the next with a few clicks.
There’s no running around getting forms
together as data can be made available
electronically on request.
Rob Nicholls, a senior lecturer at the
UNSW Business School, says open bank-
ing ushers in the era of “no-haggle rates”.
When you have a transparent system that
shows you what everyone else’s lending
rates are, it’s in the bank’s interest to keep
you as a customer by guaranteeing the
best rate for you, he says.
Australia can look to the UK for an
example of open banking at work. The
regulation was introduced there 18 months
ago. As in Australia, small businesses in the
UK were paying too much for their over-
drafts and ready cash would sit in accounts
not earning interest. Research found that
people in the UK were more likely to get
divorced than switch banks.
It’s a slow burn. But fintech apps such
as asto.io are getting a lot of attention. Asto
is a free bookkeeping and invoice app for
small business owners that pulls together
all their account details, across various
providers, under one “dashboard”.MichelleBaltazaris editor-in-chiefof
Money. She has worked on various finance
titles including BRW (now closed) in
Australia and Shares magazine in London.NG
third party, today’s method, called “screen
scraping”, requires the prospective client to
hand over private details, such as banking
login, to allow data access.
Under this method, user data must be
stored in an unencrypted way for the ser-
vice provider to use, so there’s a risk of it
being leaked or hacked. Under open bank-
ing, the regulator requires that third-party
providers can use the metadata but names
are anonymous.
While open banking is beneficial for
small business owners with spotless credit
ratings, it can work the other way for oth-
ers. Those with a poor credit history, with
a record of missed payments and defaults,
could be set back by unfavourable rates
and stricter conditions.
Open banking is being rolled out in stag-
es. Since July this year the big four banks
have been required to make credit and
debit card, deposit and transaction account
data available for a pilot program. From
February next year they will be required
to share mortgage data and from July 2020
open banking must be fully operational
across a broader product set (for example,
farm management, pensioner deeming,
consumer leases and foreign currency).
Banks and finance providers outside
the big four have until July 2021 to adopt
the new data-sharing standards.
Nicholls says digital literacy is going to
be even more important, as open banking
is just the beginning. The next cab off the
rank is the energy industry, followed by
telecommunications. This means small
business owners can also start saving on
their utility and phone bills too. But that’s
still a few years away – and they need to
get their heads around the new rules first.In th UK, people are
more likely to get
divorced than break
up with their bank