It could change the way you manage your money… but only if you know what it is
Open Banking was launched in the UK just over one year ago. And what an exciting year of dramatic change it has completely failed to be.
Despite the fanfare and news stories and debates about security, Open Banking has still not made much of an impact on Brits. We just haven’t really got excited about it yet.
In fact, research from digital platform designer Splendid Unlimited shows that less than one in 10 of us have actually used Open Banking and only 22% of people say they have even heard of it.
Not so much a banking revolution as a banking damp squib.
But that’s frustrating as these new banking rules could make a huge difference to how we all manage our money, helping us to make the most of new technologies like apps that help get our spending in check.
Here are the answers to five key questions about Open Banking.
1. What on earth IS Open Banking?
Yes, if you’re one of the four out of five people who has no idea what it means or entails then this is probably a good place to start.
Open Banking rules came into force in January 2018. The new regulations mean that all UK-regulated banks have a legal duty to let their customers share their personal financial data with other regulated companies.
That means that instead of your bank carefully locking away all your information, you can choose to make them share it with other providers – particularly those offering to use that data to help you budget, track your bills or save.
2. Why would I want to share my data?
We’re always being told to keep our data secure so the idea of ‘open’ banking sounds really wrong.
But as fintech firms come up with new ways to help us save, budget and manage our money better, they needed more access to their customers’ banking data. Many banks and building societies weren’t keen on this because of security concerns and perhaps because they didn’t want customers going elsewhere for financial products.
The new rules mean they have to allow you to share you data if you want to.
So, you might agree to share data from your bank account with an app that analyses how much you can afford to save and automatically moves the money each month.
Or you might agree to share it with a budgeting app that shows you where you spend your cash.
There are lots of developments in fintech and these rules mean that you can decide to make use of them if you want to – your bank can’t stop you.
3. Do I just hand over my password?
No! Don’t ever just hand your banking details over to a third party, no matter what they are offering you.
Before the Open Banking rules, some people had to give apps their bank account login details in order to use the services. But the new rules mean your bank has to help you share your data if you give permission.
So never had over your data and check a provider is registered with the Financial Conduct Authority for extra peace of mind.
4. What if I don’t want to share my data?
Then you don’t have to. If you don’t do anything then nothing changes, Open Banking is an opt-in service. If you don’t want to make use of any of the new swishy apps that use it then you don’t have to.
And some people suggest caution anyway. Providers that can use Open Banking rules are carefully regulated and they must keep your data safe.
However, some analysts have pointed out that the more companies have access to your data, the less safe it is.
One other important thing. If you change your mind about a company at any point then you can withdraw permission and they will no longer be able to access your data.
5. Okay, I’m interested. What Open Banking apps are available?
Although customer take-up might still be low, there are a huge number of apps already available that make use of Open Banking.
Several help customers set money aside by analysing their spending and then saving regular, small amounts of cash.
Others give users a dashboard that brings together all their different financial products from different providers so they can see all the data in one place.
There are even apps that can help identify which financial services are best for your specific situation.
Open Banking may have had a slow start but it’s likely that more and more people will begin to make use of it as more innovative apps come to the market.
And more innovation allowing people to learn more from their own data could mean that banking revolution is getting closer.