Have you heard about open banking? I know that lots of people haven’t so today I’m going to answer a couple of questions that I’ve been asked a few times over the last couple of weeks – What is open banking and how does it affect YOU?
The ‘What is open banking’ questions have come about because I’ve shared a couple of new innovative finance and banking apps and websites recently in my Facebook group and a few people have contacted me to say that they’re a little worried about these apps and how, in most cases, they need to link to your bank account in order to work.
Before I go into the opportunities that open banking has given us, let’s go back a little bit and I’ll explain a little bit about why it was introduced…
What is open banking?
Basically, Open Banking is a series of reforms recommended by the UK Competitions and Market Authority (CMA) that are in the process of being implemented to try and give UK consumers more choice when it comes to how you manage your finances.
The reforms state that you have the right to share personal financial information such as your transaction information, regular bill payments and Direct Debits with authorised providers.
An authorised provider could be a new app or a website who pull all of your spending into one place and help you manage your finances better because you have it all in one place – one app I’ve signed up to analyses your spending habits and makes recommendations on where you can change for the better.
Another example of an authorised provider could be your existing bank who could pull in information about another bank account or credit card that you might have elsewhere.
Should you be worried about open banking?
I totally get the concerns about letting a third party access your bank account but the beauty of this is that the access they have is only ‘read only’ access and the level of security with these apps is the same as you would expect from your own bank. You also get full protection from your bank if anything goes wrong (which it really shouldn’t thanks to the bank level security) but only if the company you’re using is authorised by the Financial Conduct Authority (FCA) as that’s who will be regulating these companies. You can verify that they’re fully authorised by checking the FCA’s Register, and the Open Banking Directory.
You don’t have to share your data if you don’t want to – just keep on doing what you’re doing now if you’re happy with that. Nothing at all will change without your permission so this definitely shouldn’t cause you any concern.
But if you do want to try a new way of managing your finances then there’s about to be a lot of choices available to you – some of which I’ll be sharing with you over the next few months.
There are companies who will help you manage your finances through Facebook Messenger, companies who can review your bill payments and let you know the best times to change (I reviewed one here last year), companies who can add up how much you spend on each type of spending category (eg, shopping/petrol/clothes) and companies who do all that and much more.
Even without all the fancy features, Open Banking lets you manage all of your financial accounts across multiple providers in just one place which has got to be a good thing, right?
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