Open Banking is the new digital innovation sweeping UK banking services, which could contribute more than £1billion annually to the UK economy. Open Banking is the UK’s implementation of the EU’s Revised Directive on Payment Services from 2015. There will be various measures introduced, but the main one being banks will now be able to provide financial information such as your spending habits, regular payments and the companies you use with you permission. Measures such as this will subsequently improve competition in the sector, as it will allow savers to compare rates between banks and switch in minutes online.
The new reforms have only just come into force in the UK last month, and also allows customers to see all their money on one screen, also enabling them to better access budgeting tools. The changes have been enforced by big banks by the Competition and Markets Authority, however, news only recently emerged that six of the major lenders – HSBC, Barclays, RBS, Santander, Nationwide and Bank of Ireland, all missed out on the opportunity to implement the new digital tool back in January, and have now been allowed more time to comply with the innovation.
Banks such as Danske, Lloyds and Allied Irish Bank all transitioned on time, and data suggests that a small number of transfers have been made since the new rules, as lenders continue the trial the new service. It is said that a more comprehensive and detailed trial will take place in the next month, eliminating any issues as quickly as possible.
Researchers at the Centre for Economics and Business Research (CEBR) claim that despite only a few small transfers made, the impact on the UK economy will ultimately give the GDP a £1 billion lift, as well as creating more than 17,000 jobs, further prospering the chances for the UK economy to grow and to flourish in such an uncertain time post Brexit. The CEBR report, which was commissioned by Trustpilot has found that a greater transparency on customer credit risk is more than likely to reduce risk premiums and therefore expand credit access. However, the Open Banking changes could make customers more prone to scams, as customers have repeatedly said they are reluctant to share financial data with third parties. Further to this, a recent survey by Accenture has found that 69% of banking customers will not consent to sharing their financial data with any company.
So, if you are interested in Open Banking and how it works, you will be asked to agree or to decline for open banking when you subscribe to a product or service with a bank. The company you’re subscribing to will only ask for the data it needs to provide the service. They will also infer exactly what data they need, how long they need to gather the information, and what they are to do with it. At any given time, you can revoke your permission for them to use your own personal financial data.
But what’s most important is knowing who to share your data with. You must remember to be vigilant and not give out your data to just anyone. You will only be protected by your bank if something were to happen. Providers who have been authorised and regulated by the FCA will offer two types of services:
Account information services – this will allow you access different bank accounts you may own, in one place, so you can thoroughly learn how to budget as effectively as possible where all your money may sit.
Payment initiation services – this service will enable you to pay companies directly from your bank account and not using a third-party service such as Visa or MasterCard. This could expand to tech giants such as Amazon, where purchasing an item is a quick and convenient process.
If you’re interested in learning more and whether open banking is right for you, have a closer read into the initiative plans and gain as much advice and information before agreeing to sharing your personal financial data.