What is Open Banking, and is it Safe?
- Changes are being made to banking this week
- Meant to make banking more competitive
- Problems with sharing your private data?
- How will you be affected?
From the 13th January, banks will be able to share your personal data with third parties, as part of an ‘Open Banking’ initiative from the Competition and Markets Authority.
This was announced in Philip Hammond’s Budget speech.
What is Open Banking?
Open Banking has been designed to make the banking system more competitive, and a way to get you the best deals on mortgages, overdrafts, and broadband deals.
Open Banking will do this by putting all your financial data in one place.
This information is currently held by your bank or building society, and Open Banking will mean that banks can share this with third parties- as long as you give permission.
The goal for this is that other providers will be able to get an idea of your spending habits and offer you a more personalised service, that can result in a better deal for you.
This should get banks to be more competitive, and offer better value services of customers.
When you sign up for a new service, you will have the option of sharing your data with a third party, it will not be compulsory.
Which Banks will use Open Banking?
Nine current account providers will be adopting the Open Banking.
Four of these will be starting on Saturday the 13th January, these are: Allied Irish Bank, Danske, Lloyds Banking Group, and Nationwide.
The other five have been granted an extension by the Competition and Markets Authority, and these are: HSBC, Barclays, Santander, RBS, and Bank of Ireland.
Is Open Banking Safe?
There’s huge concerns over the safety of Open Banking.
Given online hacks to companies like Equifax, many feel that having personal financial data stored by a third party is asking for trouble.
There is a chance that Open Banking can be used to commit bank transfer fraud, or used deceptively in terms of price comparison.
All third-parties who want to store your data will have to be registered with watchdog Financial Conduct Authority, in case they face a security breach.
As the UK will be the first to introduce Open Banking, it is hard to determine how much of a risk it will be, but some banks including Natwest have told their customers NOT to use Open Banking to protect their money.
If you have concerns over the safety of Open Banking, then it would be best to not sign up until these concerns have been resolved.
What are the Positives of Open Banking?
The point of Open Banking is to benefit the consumer and get them the best deals, so you can make the most of your money.
The main positive is that you can choose who you want your data to be shared with, and this will allow you to get the best deals.
It has been supported by consumer group Which?, as a good way of bringing more competition into the market and encourage switching.
Gareth Shaw from Which? Said, “Switching rates are still relatively low and that is because people have not been able to see that is in it for them.
“Open banking will give people the opportunity to compare current accounts and switch to what works best for them.”
What are the Negatives?
The main problem with Open Banking is security, and consumers not being comfortable dealing with brand names that they do not recognise.
Information from a third party will not be impartial- they will be trying to get you to spend your money with them, or bank with them.
You may get offered a deal that will save you money, but there is no guarantee that it will be the best deal out there.
Other changes to how you spend your money are happening in 2018- from this weekend you won’t be charged extra when you pay by debit or credit card, and in April, your council tax bill could be going up by 6%.