Open banking, one of the most seismic changes to hit the financial services industry, giving customers more power — and better enabling them to switch providers — has been delayed.

Key points: Open banking means mortgage, credit card, deposit and transaction data will be available to customers and third parties they nominate

Open banking means mortgage, credit card, deposit and transaction data will be available to customers and third parties they nominate Open banking was introduced in the UK nearly two years ago and is designed to enhance competition

Open banking was introduced in the UK nearly two years ago and is designed to enhance competition The system was expected to launch with the big four banks in February, but has been pushed back until at least July

The competition watchdog has today pushed back the introduction of the system, which essentially gives customers ownership of their transaction data, to allow more time for testing of security and privacy protections.

Open banking means that first the Commonwealth Bank, Westpac, ANZ and NAB — and eventually all banks — will have to make credit card, deposit and transaction data available if customers request it, by July. From November, they must add in mortgage data as well.

The system was supposed to be in place for the big four banks by February.

"The Consumer Data Right (CDR) is a complex but fundamental competition and consumer reform and we are committed to delivering it only after we are confident the system is resilient, user friendly and properly tested," ACCC commissioner Sarah Court said in a statement.

"Robust privacy protection and information security are core features of the CDR and stablishing appropriate regulatory settings and IT infrastructure cannot be rushed."

What is open banking?

The relationship between banks and their customers is generally thought about in terms of money. From next year, it'll become about power.

"This is potentially earth shattering for the financial services industry," said Professor Deborah Healey, a competition law specialist who has researched why so few customers shift banks.

"Because these are very important decisions people are making, and I think they will put time and effort into making those changes if, in fact, they see that something better is on offer."

Open banking means that at the touch of a button customers can choose to share their transaction data, including their spending history and direct debits, with a third party. Companies can then analyse that information to offer better deals and incentives to switch.

Has this happened elsewhere?

When the popularity of mobile phones took off in the late 1990s and early 2000s, Australian consumers were stuck. Companies owned the actual phone number and knew customers rarely wanted to wear the hassle of changing it when they switched providers.

But in 2001 portability legislation changed everything, allowing customers to switch providers, keep their details and move on as if nothing had happened. Last year, more than 2.3 million customers, almost 10 per cent of the market, shifted.

The UK introduced open banking almost two years ago. The founder of peak body Open Data Australia, Jamie Leach, said the uses of the technology were still being worked out, but it was already getting customers to think differently.

"The potential for people to move between brands, or the ease for people to be able to have products with multiple brands and still be able to track that through a single app is real and that that's happening right now," she said.

"The old days where people have all their 'eggs in one basket', because it's easier, is not going to be the future."

In the UK, online-only "neo banks", financial tech (fintech) companies and aggregators have embraced the technology, because it enables them to convince rusted-on bank customers to examine their accounts and see if they can get a better deal.

"Fintechs are chomping at the bit. It's going to be a bit of a game changer," Ms Leach said excitedly.

"What it is, is you being able to determine if you want a third party, if you want an app that's going to make your life easier to navigate or offer you better rights for instance, to access your credit, follow your your banking history. It's about giving consumers that choice."

Why don't people switch banks?

It's something of a joke in the financial services industry that people are statistically more likely to change their spouse than their bank. Paul Ranson, chief executive officer of Tasmania's Bank of Us, said the mantra had a ring of truth.

"You tend to move based on life-cycle events, so is it your first personal loan? Or your first home loan? It's probably a big life-cycle event," he said.

Mr Ranson predicted open banking will take three to five years to bed down, but sees benefits for institutions like his eight-branch network.

"I think what we'll see is that it's going to become simpler for consumers to really understand, 'am I getting value for the products?'" he said.

"It's going to be the start of our overcoming the inertia that people have about moving from one provider to another."

There are no clear figures on how often customers switch banks.

But better offers, and the ease of switching, could change that.

Sally Mackenzie, strategy director for the Customer-Owned Banking Association, said the greatest benefit would be in customers receiving information about products tailored to their personal financial circumstances.

"Consumers will have the right — it'll be their choice — whether they want to share their data, it'll be entirely up to them, but if they do they'll be able to receive advice on what the best credit card is, for example, based on whether they pay it off at the end of the month or carry over the balance," she said.

Professor Healey said switching brought competition and efficiency to the banking system, but complex documentation made it hard for customers to judge if they could get a better deal. Open banking may change that.

"The days when your bank was a bank for life, I think, are long gone anyway. But I think there will be a lot more movement and it will also stimulate competition," she said.

"Even the threat of switching is very important in terms of having an efficient competitive market."

Banking is just the start for the Consumer Data Right. The teething problems will not give much comfort to large utilities because, after banking is bedded down, CDR will be rolled out for energy and telecommunications customers as well.