This would essentially give consumers an easier time to switch to the banking and financial products that best fit their financial circumstances.

Many experts from the Australian fintech sector are excited about the open banking system – they believe it could reduce consumer harm and drive providers to practice responsible lending.

They also believe that open banking will benefit consumers because it will give them more power over how their financial information is used.

How open banking will affect your mortgage

Federal Treasurer Josh Frydenberg previously noted “that the average Australian household could be saving up to $1,000 per year on their home loan if they switched to another lender – but many do not”.

According to most survey results, this “loyalty” to the lender has more to do with convenience rather than getting the best deal. Most borrowers avoid changing lenders due to the hassle of switching to another provider, such as shopping around and the time-consuming paperwork involved.

But with the open banking system, this “hassle” will dramatically lessen.

You can simply approach an agent or broker, provide your financial information and have them determine the most appropriate loan product for you based on your income and payment terms.

Likewise, they can give more appropriate advice with regard to loan features and connected products that you may add on to your new loan.

Since all you need is to give your consent to access your data, the broker will spend less time with the administrative work. This means a faster turnaround for loan applications.

Participation isn’t necessary

Sharing your data isn’t compulsory. Rather, the open banking system will simply allow you to access your complete financial data across all your financial providers. 

If you opt to provide this information to a third party, such as a broker or a different provider, it would be easier for them to identify your specific financial needs.

For instance, if you wish to replace your current credit card, you may simply access your data and have the new provider recommend the best card for you based on your spending behaviour.

However, you may also choose to reject access and withhold your sensitive financial information to third parties you don’t fully trust.