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Open Banking: a Quiet Revolution
You may have noticed a new phrase cropping up in the financial pages; open banking. But what is it and what sort of impact will it have on the way we manage our finances on a daily basis?
Introduced in response to EU legislation, open banking quite literally ‘does what it says on the tin’; potentially opening up bank information to outside interactions. Or to put it in the words of the Open Banking website “Open Banking is a new, secure way for customers to take control of their financial data and share it with organisations other than their banks.”
What does that mean in practice? First of all it means that banks can no longer hide your data behind a security wall, being required to share data with other regulated providers on request. Examples given include the ability to see all of your bank accounts and credit card data on a single screen with the added functionality perhaps of a third party app analysing all of your spending and suggesting cheaper energy providers or switching money around to avoid unnecessary overdraft charges. Open banking will only be available for private consumers and small businesses.
It is important to note that open banking participation is driven by the customer; you don’t have to give permission for data to be shared and you can revoke existing permissions at any time. In other words it’s not an opt-out system; customers have to actively opt in if they want to take part. From a security point of view, only firms which have been vetted and registered will be able to take part in open banking. However, various organisations including NatWest and Which? have warned that consumers need to be careful that they aren’t tricked into revealing banking information by rogue companies which have mimicked the websites of genuine companies.
Open banking was launched on 13 January 2018. However, some of the banks aren’t ready to participate and have been given an extra six weeks. Even then selective trials are going to take place for the next couple of months so for the majority of consumers and small businesses it will be March before anything happens.
If you are looking for pensions or investment advice, or if your situation has changed and you may therefore need to review your existing investments, contact Beckworth by using one of the links on our website.