You may have heard the term Open Banking before, but the name doesn’t really explain what it means. If you use third-party providers (TPP’s) – like budgeting or automatic savings apps – chances are you would have been able to let them access your bank account details via online banking or your mobile banking app. This is where Open Banking is important.
But What Exactly is Open Banking?
Open banking is a way of giving authorised Third Party Providers (TPP’s) access to your financial information in a secure way. It involved a series of reforms which were called for by the Competition and Markets Authority (CMA), to urge banking providers and financial services to let people share their financial data with TPP’s.
These reforms aim to shake up the banking industry and encourage new financial services to innovate. This competition should result in better products for managing money.
Do I Have to Share my Data?
No, not if you don’t want to! Any authorised providers can’t look at your freely look at your banking accounts. The rules require banks to share your data, but only if you give permission to the new authorized provider.
For example, when you download an app and sign up to a TPP’s, like an automatic savings app, they will ask you for your consent to access your information. Once you’ve agreed, they will send a request to your banking provider, who will then process and share your account details with the TPP.
So, if you’re not comfortable sharing your financial data with another company, you don’t need to worry, as the choice is completely yours.
I’m Thinking About Using a TTP, is my Data & Money Safe?
If you download an app from an authorized provider, it will only access the data necessary for the service you signed up for.
If you have a current account and a savings account with a bank and want to use a TTP to move money from your current account, they will only see information about that account. They won’t access any details about your savings account.
All providers must follow data protection rules and GDPR regulations. This means the TTP must explain which data it will use, how long it will keep it, and what it will do with your data before you sign up. Make sure the provider is authorized to ensure your banking provider covers you if anything goes wrong.
Will I Know if I’m Using an Authorised Provider?
It’s easy to find out if a TTP is authorised by checking on the Open Banking Directory. It should also be clear on their website along with their personal registration number.
If something feels off or you’re unsure if a TTP is legitimate, it’s important not to share your data.
If you’ve already signed up with an unauthorised TTP, you won’t get the same protection against fraud. This means if you lose your money when using a TTP, your banking provider might not refund you. So, going forward it’s always best to check with the Open Banking Database before downloading any third-party financial apps. If they’re not registered on the database, you can always contact the creators and ask for more information.
Opening Banking for a More Competitive Banking Industry
It’s completely up to you if you want to use TTP to improve the way you manage your money, but Open Banking does have the potential to revolutionise the digital banking industry and improve the services that banks currently offer for a more fair way of banking, that puts you in control.
Remember, if you’re wanting to use a third-party provider to further enhance your banking experience always ensure they’re authorised before you consent to anything.
