Are you struggling to keep up with all the innovation currently sweeping across Britain’s financial sector? From mobile banking to prepaid debit cards for children, technology is forever changing the way we access and use money. Open Banking is the latest revolutionary development in FinTech, but what exactly is all the fuss about?
The Open Banking regulations aim to transfer the ownership of the financial data from the bank to the customer and to make it easier for customers and businesses to share their transactional data.
This advancement in technology has allowed businesses to gain more in depth understanding of their customers’ spending behaviours, to make better informed decisions and to develop new financial services targeting a specific subsection of customers or solving a specific industry problem.
In practical terms what this means for customers is that the products they are being offered are tailored to their needs and as a result the market has opened for many customers who were previously underserved by certain financial services.
Open Banking works with the existing framework of online banking to allow you to give consent to regulated third party providers to securely access your bank transaction history.
The UK’s largest retail banks and building societies are legally bound to allow certain information to be shared securely through Open Banking with regulated companies. This includes: Barclays PLC, Nationwide, Danske, HSBC, Santander, RBS, Lloyds Banking Group PLC, Bank of Ireland and AIBG. Other banks and building societies can also opt to use the service, and although they are not required to do so by law, many organisations are now using Open Banking in their services.
Moreover, a huge number of financial providers, regulated by the Financial Conduct Authority (FCA) and its European equivalent regulatory bodies, are using Open Banking to allow customers to compare and access new products based on their financial spending.
Open Banking is rapidly changing the financial sector and new products are emerging almost daily. The possibilities are endless, and it is expected that innovative companies will bring about solutions to problems we didn’t even know we had. Here are some of the major achievements of Open Banking that are already changing your life for the better.
Open Banking encourages healthy competition between service providers in the same industry and consumers are now able to easily compare deals for a range of products through comparison services. From finding a better mortgage deal to finding a cheaper electricity provider, the power is now in your hands. A better offer is waiting behind every swipe on your smart device!
Do you ever struggle with making it through to pay day? Have you wondered how and where you spend your money? It can be overwhelming to think about your finances and identify spending behaviours, especially if you are experiencing financial difficulty. The emergence of personal finance management tools facilitated by Open Banking technology has automated this process so that you can easily break down your spending habits and identify areas for change so you can make the most of your money.
The new technology has transformed the high-cost short-term lending sector by allowing direct lenders to gain more in depth understanding of their customers and to make better informed lending decisions. By harnessing the power of Open Banking technology, you can validate your creditworthiness to a lender with current financial data. The automated assessment takes into account how much you can afford to borrow given your current income, regular financial commitments and usual spending. Open Banking will paint a realistic picture of your current financial health regardless of whether you have borrowed before. This will maximise your opportunity to get access to credit that is affordable to you.
Managing your bookkeeping can be a tedious and time-consuming process, however integrating your financial data with a program which uses Open Banking can automate your accounting report. The smart system updates when you receive or spend funds and saves you from the laborious task of keeping track of your receipts and invoices, and working out your income and expenditure.
The organisations which are a part of the Open Banking service are all highly regulated businesses that have passed through a series of rigorous assessments before being authorised. You can find a comprehensive list of all the accredited businesses on the FCA’s Open Banking Directory.
If you are worried about sharing your data online, it’s important to remember that you are always in control of who you choose to allow access to your financial data and you can stop access at any time. There are also measures in place to ensure that only you can authorise a connection between your bank and a regulated third party provider. You will never be asked to share your log in details and password and although the Open Banking framework is extremely secure, there are always further precautions that you can take to prevent fraud.
If you have any concerns about the security of your data or the way your data was handled you should discuss your complaint directly with the company, bank or building society in question. They should be able to provide you with a comprehensive response.
More questions? Check out our FAQs section.