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.
The idea behind these reforms are to challenge the current banking industry and allow more financial services to challenge and innovate the sector, which in turn, should provide better quality products to help people manage their 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 say that banks must allow your data to be shared but this is only if you specifically give permission to the new authorised 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?
As long as you download an app through an authorised provider, they will only be able to access the data needed for service that you’ve actually signed up for.
For example, if you have both a current account and savings account with a banking institution and want to use a TTP to move money from your current account elsewhere – they will only be able to see information about your current account and no data surrounding your savings account.
All providers have to follow and comply with data protection rules and GDPR regulations, which means the TTP has got to tell which data it will use, how long they will use it for and what it will do with your data, before you sign up. However, you will need to ensure the provider is authorised, so you’re covered by your banking provider 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.
It’s important to mention here that if anything feels wrong or you’re unsure whether a TTP is legit, don’t give them 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.