Open Banking is a secure way to give providers of goods and services access to the financial information of consumers – whether individuals or small businesses. Launched in 2018, it is fast becoming a hot topic of conversation in the business world as well as amongst consumers.
Open Banking enables small businesses to see all their finances in one place.
This means it can help businesses with budgeting. It can also help to find the best deals and products whether that’s in relation to insurance and banking, or utilities and marketing services, or any other relevant field.
Ultimately, Open Banking helps you and your business to shop around for and use the products and services that best suit you and your business.
It can also save time by allowing direct payments and the sharing of data that enables providers of goods and services to tailor their offer to you and your business. For example, retailers might access customers’ financial information so that they can tailor products or generate relevant point-of-sale offers and discounts based on consumer spending habits.
Banks and building societies who currently offer Open Banking are:
Bank of Ireland, First Direct, Citi and M&S Bank will all join the Open Banking revolution by the end of 2018.
There are already dozens of apps and websites, too many to list here, that have already started to offer new or improved products and services based on Open Banking principles.
Some good examples of early innovators include Yolt, the smart money app, peer-to-peer lender Zopa and Clearscore who provide free credit scoring and credit reports. These organisations are utilising the power of Open Baking to enhance their services.
Nesta (the global innovation foundation) has identified 12 Fintech companies as being most likely to shake-up the small business banking world via Open Banking.
Personal and business current accounts, accessible online or by mobile, work with Open Banking now.
In the not too distant future, Open Banking will be used for other payment accounts including credit cards and online e-money accounts.
You are always in control of your data.
You must give your permission to whatever regulated app or website you wish to use - this doesn’t happen automatically. However, if you change your mind, simply go to the regulated app or website, and withdraw your consent. Alternatively, contact your bank or building society to cancel the website or apps access to your information.
Open Banking is completely free. That said, some of those websites and apps that utilise Open Banking may make a charge for using their Open Banking products.
Consumer champion Which? have explained in detail the benefits of Open Banking to consumers and SMEs as well as some of the potential risks and what to do to reduce or eliminate these.
Open Banking is regulated by the Financial Conduct Authority (FCA). The FCA provides a detailed breakdown of Open Banking and the associated EU Payment Services Directive (PSD).
The Government is backing Open Banking. Speaking at Mansion House on 21 June 2018, Chancellor Philip Hammond MP said, "Open Banking will completely change the way in which consumers and small businesses engage with banking, helping them access better value and more targeted services."
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