Over the last few years, the landscape of UK banking has been set to change. Not only do we have an influx of new ‘challenger’ banks within the industry, but we are also about to see the introduction of Open Banking.
What is Open Banking?
So, what exactly is open banking and how will it affect the average British account holder?
Open Banking is an effort to ‘open up’ the data that is currently held privately by each of the major UK banks, and provide it to third party companies and developers, who can use it to build better products for consumers and give greater transparency to the public. The benefits of this initiative, which is being driven by the CMA & FCA here in the UK as well as the European Commission, will essentially allow consumers and businesses that work with financial data to be better connected. The legislative changes being brought in will mean that banks will be obliged to allow consumers to share their banking data with trusted partners.
Just some of the potential new applications that could be offered to consumers with the introduction of Open Banking include;
Bank current account comparison
Credit card comparison
One of the primary objectives that the initiative looks to perform, is to allow consumers to choose where they hold their money and see easily whether or not they are currently getting a good deal. As well as banking comparison services, the sharing of financial data will mean that third parties will have the opportunity to build services that make it far simpler to understand credit profiles and product suitability, as well as a host of new and innovative digital service products.
When does Open Banking come into effect?
Open Banking is already partly in effect – banks in the UK are now sharing information such as ATM locations and branch details, which 3rd parties can tap into and provide as a service to their customers.
Officially, the second phase of the Open Banking rollout will be in January 2018. This is when the more sensitive data such as account details and transactions will be made available via banking APIs (Application Programming Interfaces).
What are the risks of Open Banking?
As with anything involving individual or business financial data, there are risks for both the banks themselves and of course the end consumer. Industry experts do not anticipate the uptake of Open Banking to be immediately popular, but it will grow in time, so UK banking companies will need to ensure that sensitive data is held, managed and transferred securely. Also, banks will need to help customers understand the risk involved when allowing a third party to access their banking information and who is ultimately liable if anything goes wrong.
Do you know of any new financial services that are going to be utilising Open Banking? Do you know how your bank will adopt the new processes? Let us know in the comments your thoughts and opinions!