Open Banking: What is Account Verification?

Open banking launched in Australia just under two years ago.

Since 2020, we’ve seen an impressive uptake from banks and customers alike. 

The big four banks (CommBank, ANZ, Westpac and NAB) officially enabled their customers to use open banking in July 2020. Over a year and a half later, we now have 16 banks signed up for open banking.

And yet, there is still much confusion and scepticism about the security of digital banking products. The more Aussies know about open banking’s security, account verification, and control. The quicker open banking will find its feet in this country.

What is Open Banking?

Open banking is an open-access approach to financial data, and this doesn’t mean that anyone can view everyone’s finances. Instead, customers can consent to share their information with third-party platforms, such as credit lending or investment apps. 

With greater awareness of each customer’s financial circumstances, these platforms can offer tailored products and solutions. 

The perception that open banking is not secure keeps many Aussies away. However, the reality is that open banking allows more control for the customer. Users can control who can view their financial data and how, but they can also better manage their finances.

How Many Australians use Open Banking?

According to Statista, 73.05% of Australians used digital banking in 2018. However, the Australian Financial Times suggests that the eager approach does not follow open banking. More than 5 million people used open banking in the UK four years after launching. 

Remember that Australia’s open banking is still in its infancy. The next few years might see significant uptake.

So, What is Account Verification?

If Australians aren’t eager to sign up for open banking because they fear the lack of security, then the answer to their worries lies in account verification. 

Traditionally, customers have to provide identification to sign up for any bank or financial product. Whether setting up a direct debit or applying for a mortgage, the customer must verify their account.

Account verification is a two-step process that enables customers to share their bank account with a third party within minutes. It’s much quicker and more secure than outdated methods, such as micro-deposits. 

How to Speed up Account Verification?

Sending micro-deposits and asking customers to verify the amount could take days. It requires effort at both ends — admin work for the business and user effort. 

The same is true of sending physical copies of bank statements or alternative means of account verification. These methods allow for human error — resulting in potentially costly mistakes. Open banking automates the process. 

The Advantages of Instant Account Verification

Does faster always mean better? Well, in this case, it does. What used to take several business days now takes mere minutes, at no extra cost to the business or user. 

1. Smooth Onboarding

A streamlined onboarding process is in the interest of the customer and business. The customer must sign into their bank account through the third party app and consent to sharing. The quick process enables them to take advantage of various platforms without wasting time. 

Streamlining the customer onboarding process means fewer customers abandon the application — which is better for the business. A company can use the extra time and money to create a better user experience. 

2. User Experience

When customers verify their accounts, they opt to share their financial data with a third party. Third parties can create unique, personalised experiences for each customer. Say you signed up for a personal finance management app; the platform can offer tailored insights into your spending habits.

3. Personal Control

With a range of open banking platforms available, customers can find a solution that suits them. A better user experience enables users greater control over their spending. Plus, with tailored insights into their spending, they can better manage their budgets, savings, and investments. 

Open banking doesn’t mean that everyone can see everything. It means the customer can take power over their finances. Account verification allows the user to control who can access their data, how they use it, and when they can use it.

4. KMC / AML

Companies must abide by KMC and AML regulations. With an infallible account verification process, businesses prevent costly and damaging errors. Additionally, they want to avoid fraudulent users taking advantage.

Final Thoughts

Account verification and open banking are faster, more flexible ways for users to manage their money. It protects businesses from fraudulent applicants and enables customers to control their finances better. While relatively new in Australia, its technical superiority will see it thrive.