Your financial information, such as what you spend in addition to also where, in addition to also how often you go into debt will be private. This particular will be information only available to you in addition to also your bank.
This particular has been like of which for years, yet all of which will be about to change.
Customers of nine of the biggest UK banks have received letters in addition to also emails in recent weeks informing them of which their information can be shared, securely, with various other firms. All they need to do will be give their permission.
The UK’s competition watchdog says This particular so-called Open Banking regime will revolutionise many people’s financial lives, helping them get better deals.
Others are far more sceptical. So how does all This particular work in addition to also what does This particular mean for you?
What will be This particular?
Your financial data will be valuable. For example, a loan provider could be keen to know exactly when you go into the red each month.
So far, This particular information – or data – will be held by your bank. inside past, they may have been keen to sell you various other products, such as overdrafts at a certain interest rate. Most people stay loyal to their bank. The Competition in addition to also Markets Authority (CMA) found of which only 3% of personal customers move their accounts each year.
The theory of Open Banking will be of which such data will be owned, not by the bank, yet by the customer. He or she can share This particular electronically in addition to also get a better deal on financial products, such as getting a cheaper overdraft elsewhere.
A brand-new set of EU rules will require banks, building societies in addition to also various other financial providers to let customers easily in addition to also securely share This particular financial data with various other banks in addition to also various other regulated financial businesses.
The CMA will be also forcing the nine largest current account providers – Allied Irish Bank, Bank of Ireland, Barclays, Danske, HSBC, Lloyds Banking Group, Nationwide, RBS Group, in addition to also Santander – to have such a system ready by 13 January. Questions have been raised about whether they will all be ready in time.
How will This particular work?
In practice in addition to also in time, customers will probably see a dashboard on their bank’s mobile phone app.
This particular will show them how much money they have in their different accounts, with different banks, in addition to also eventually how much they owe on credit cards in addition to also store cards too.
They will also be able to switch on various other services. So, a business separate to the bank might take money left over at the end of the month in addition to also invest or save This particular. Another may look at how much you spend on broadband in addition to also offer to switch you to cheaper deals. Another may spot unusual transactions via someone with mental health difficulties in addition to also alert a carer.
Crucially, these services will have access to the data, yet will not possess the login in addition to also password details to your account. A customer can switch off these services whenever they want.
A set of computer programming rules inside UK, called Application Programming Interfaces (APIs), will ensure all these brand-new services in addition to also banks to talk to each various other.
All of these providers will be regulated by the Open Banking regime under Financial Conduct Authority rules.
Open Banking in action
Examples of brand-new services include:
- Money management apps of which give tips in addition to also advice based on how your current account will be used
- An app of which monitors your balance in addition to also warns you if you are going overdrawn
- Third parties, such as a cost comparison websites, analyse spending patterns in addition to also recommend products based on This particular, such as a cheaper overdraft, or a better credit card
Source: Open Banking
What will be the benefit?
The CMA’s review of retail banking decided against capping overdraft charges, claiming of which This particular Open Banking system will allow us to shop around in addition to also switch our current account provider more easily.
In time, This particular could be done that has a one-click switch, This particular will be said.
Applications for mortgages could be dealt with more quickly, as providers in addition to also brokers could access spending history, rather than ask for printed copies of the last three months of bank statements.
Early adopters say the benefits could extended beyond people’s finances. Anne Boden, of mobile-only Starling Bank, says customers will be able to see exactly what they bought for lunch each day, an app could analyse the calorie levels, in addition to also then cross-check This particular with how much exercise of which person will be doing.
Tightening one’s belt could be literal, as well as financial.
“This particular gives customers transparency in addition to also choice – something which the big banks have kept via them for too long,” Ms Boden says.
What are the downsides?
Customers could be bombarded with invitations to try out a brand-new service, in addition to also could quickly lose control of their financial data, according to Mick McAteer, of the UK’s Financial Inclusion Centre.
He describes Open Banking as “a daft idea”, which will lead to more financial exclusion for those already on low incomes.
There will be a danger, he says, of these consumers being exploited, such as through businesses offering a brand-new form of expensive payday loan.
Diane Coyle, economics professor at Manchester University, says: “I was, in addition to also still am, sceptical about how much people will want to give access to their financial information to third party apps, in addition to also surely the steady drip of stories about security breaches since the plan was announced won’t have helped.
“This particular will be hard to understand people’s attitude to their data in addition to also security, though, as many cheerfully give loads of information to social media companies, yet on the various other hand were reluctant for the NHS to have access to their health data for research purposes.”
Recent research by consultants Accenture found of which 85% of those asked said the fear of fraud could put them off sharing data, in addition to also 69% said they could not share financial data with businesses of which were not banks.
An open goal for fraud?
Unscrupulous individuals could be keen to access This particular data in addition to also use This particular alongside information revealed on social media to build up a complete set of personal information.
This particular could be used to rip off consumers if the system will be not working well.
yet organisers say of which there are strict regulations in addition to also, unlike currently, all This particular can be done without giving access to your bank’s login.
If anything goes wrong in addition to also there will be an unauthorised transaction, the customer’s bank must refund the money in addition to also claim This particular back via the third party if the issue was their fault.