If you operate in or have an interest in the financial world, it’s likely you’ll have come across Open Banking. As something that’s attracting the attention of many thanks to its potential to enable communities and individuals to make informed financial choices as they recover from the impact of the pandemic, it’s important to understand what it could mean for you.
What is Open Banking?
Open Banking has been called for by the Competition and Markets Authority alongside the second Payment Services Directive legislation that came into force on 13th January 2018. Simply put, together they mean that all UK-regulated banks have to let you share your financial data such as your regular payments, any authorised providers of loans, companies you use and your spending habits, as long as you give permission.
Essentially the idea is to help you better manager your money through the use of innovation within the financial sector. It’s important to remember however, that you don’t have to share your data if you don’t want to. The rules clearly state that banks have to allow your information to be shared, only if you give your consent.
What accounts does Open Banking apply to?
Any payment account you have. These include current accounts, prepaid cards, credit cards and even some savings accounts. The rules do only apply to payment accounts that you can access online, however. This is because you’ll need to connect your online banking services with the third party involved so it can access your data.
What are some of the emerging trends?
Thanks to the pandemic, 2021 has been hit with a wealth of uncertainty as financial businesses try and navigate the economic and social impacts of the Coronavirus. Thanks to Open Banking, the financial world has the potential to help people to make more informed financial choices as they recover from the pandemic.
But what are some of the key and emerging trends that Open Banking has brought us?
- The call for greater financial literacy – it’s safe to say the pandemic has highlighted that the millions of people who have been affected by COVID-19, need more information to be able to make better decisions around loans, savings products and investments. Giving people greater visibility will help them to get back on their feet.
- Open banking is more than just compliance – many institutions are starting to realise there’s more to Open Banking than just compliance. It allows banks to join other businesses in the digital revolution and will help them to provide better customer experiences.
- It’s time for a common global standard – the standards of Open Banking are evolving rapidly. There’s an opportunity for fintech firms across the globe to develop services for consumers that don’t want to be constrained by geographical restrictions.