What is Open Banking?
Have you heard about Open Banking? Are you not sure what it means? Latest Deals is here to help you understand what Open Banking is and how you can use it safely.
What is Open Banking?
This series of reforms happened to change how financial information is shared in the UK and across the world.
Open Banking is a term used to describe the process of banks opening up data for authorised providers to access and use it.
Because of Open Baking, all UK-regulated banks must let you share your financial data with third parties. Open Banking shares your bank, credit card and savings statements.
This information can be used in budgeting applications or other services, such as when you are trying to rent a property in the UK and the rental agency needs to check your financial situation.
The main goal of Open Banking is to allow more and better products to be created to help you manage your money.
Budgeting applications can help you analyse and manage your money and even recommend products to help you make the most of your money.
You can also have access to your accounts with multiple banks in one place, giving you a realistic overview of your finances.
How does Open Banking work?
The technology behind Open Banking is called APIs (application programming interfaces). An API helps different softwares to speak to each other, and through this, your bank can share your data with another provider.
How do I use Open Banking?
Using Open Banking is very simple. You will need to give consent to a third party using Open Banking. Then you will be redirected to your online banking login page. These details won't be shared. Once you are logged in, you will be able to choose what type of information you want to share with the provider.
IMPORTANT NOTE: If you are new to Open Banking, it's better to use it on your desktop, as you’ll have a clearer picture of what is happening and what type of information you are sharing.
What are the benefits of Open Banking?
Overall, Open Banking encourages innovation and increases competitiveness. We can expect that new products and services will appear in the banking industry over the coming years, making our financial lives much easier to manage.
Open Banking also brings more automation, convenience and personalisation to the banking industry, in addition to cost reduction and improved decision-making to customers and providers.
For the consumer, the benefits of Open Banking are more financial freedom, access to financial services tailored to their needs and more control over their finances.
For the providers, the benefits of Open Banking are a better understanding of the consumers and what they can provide them with and expect from them.
Do I need to use Open Banking?
You don't have to use Open Banking if you don't want to.
Open Banking is only mandatory for banks. Your bank must allow your financial information to be shared, but you are the one that permits this to happen.
Every time a provider needs to access your financial information, they will ask for your consent to do so.
If you don't want to share it, you just don't authorise. In some cases, you won't be able to use the provider's services and will need to find another solution.
What type of accounts does Open Banking apply to?
Open Banking applies to any type of account. You will be able to share all your current accounts, credit cards, prepaid cards and savings, which is great because you will have an overview of your money and financial situation.
Who can I share my data with by using Open Banking?
With Open Banking, you can share your financial information easily, so it's even more important that you are careful with it.
Before sharing your data using Open Banking, you need to ensure that the third party is regulated by the Financial Conduct Authority (FCA). You can also check if the third party is registered with the Open Banking Directory.
What type of services the third parties authorised under Open Banking will offer?
The third parties authorised under Open Banking will offer two types of services:
Account information services
These services will allow you to see all your account information from different banks in one place. This is usually used by budgeting applications that offer financial products to help you manage your money better. An example is the Plum app.
Payment initiation services
These services will allow you to pay companies directly from your bank account without using a bank card from Visa or Mastercard. An example is Amazon, that already allows you to use Open Banking to have direct access to your bank accounts when you are paying for a purchase.
IMPORTANT NOTE: Some rental agencies also use Open Banking to have access to your financial information. With time, more and more services will start using Open Banking to make financial transactions easier.
Is my data safe with Open Banking?
As long as you are using an authorised provider, your data is safe.
You can check if a provider is authorised by accessing the Financial Services Register by FCA and the Open Banking Directory.
Also, you will be the one granting access to your financial information, so the control is still in your hands. Depending on the financial information they need, you can also decide what type of access you give to each provider.
IMPORTANT NOTE: It's important to keep in mind as well that all providers have to comply with data protection rules, according to the General Data Protection Regulation (GDPR).
Therefore, they need to tell you exactly which data will be used and for how long the data will be used.
If you have any issues, you can contact the Financial Ombudsman Service. Here, we have a full guide to help you.
What if I experience fraud on my account after I've shared my data?
You are only protected against fraud if you were dealing with an authorised provider.
If you weren't, that could mean that you might lose your money. That's why it is so important to only use authorised providers.
What should I do if my data is leaked?
If you are using an authorised provider, it’s unlikely your data will be leaked. But, if your data is leaked, you can complain directly to the third-party provider.
If they don't resolve your issue, you need to contact the Financial Ombudsman Service, here we have a full guide to help you.
Should I use Open Banking?
This is a personal decision. In some cases, to be able to use some type of services and providers, you will need to opt-in. At the end of the day, you have control. The only important thing is to make sure you are using authorised providers.
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