Open Banking is arriving soon, with the first set of banks introducing the initiative on 13 January.

Ian Major, operations director at Runpath and third-party representative at the Open Banking Implementation Entity (OBIE) tells personal finance site loveMONEY what we can expect to see.

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First off, what is Open Banking?

It’s part of a Competition and Markets Authority (CMA) investigation, which concluded in 2016 that customers can provide authorised third-party services secure access to their banking data.

Why is it being introduced?

The CMA is concerned that there is inertia in the marketplace, given that only 3% of personal customers move bank accounts each year. 

With the introduction of Open Banking, processes will be easier.

Labour-intensive tasks like searching for products that best suit your needs, applying for lines of credit and seamless budgeting and “sweeping” become automated, meaning you can better handle your finances.

Do I have to opt in or out?

By default, you’re not opted-in to anything. You sign up for Open Banking through FCA-approved services by giving them permission, which in turn gives the company access to your chosen banks’ data.

You will be able to turn that service off at any point.

When we say you’re opting-in to Open Banking, what you’re actually doing is granting an authorised company access to obtain that data on your behalf.

There’s no ‘reveal my data to everybody from this point on’ button.

If desired, you will be able to go to your bank and review the Open Banking access they have supported through a dashboard.  If you wish to opt-out of a third-party service at that point, you can.

So, if you were to bank with HSBC, you can log into your account and see a list of applications that you have granted access to and will be able to revoke each at your discretion.

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How will it benefit me?

Personalised product comparison can be carried out at a granular level, looking at how you behave with your daily finances and recommending better products for you at the touch of a button.  

Budgeting and dashboarding will retrieve data quicker than ever, enhancing your view of one or multiple accounts and optimising the flow of money between them.

For example, automatically moving money between accounts might maximise the credit interest earned or limit the overdraft or credit fees charged.

If a firm is lending money to you, it can rapidly assess your affordability without the need to supply months’ worth of paper-based statements.

This is a powerful thing because it speeds up the application process and may even allow companies to build bespoke products for customers in real-time.

Is my bank involved in the initiative?

Allied Irish Bank, Bank of Ireland, Barclays, Danske, HSBC, Lloyds Banking Group, Nationwide, RBS/Natwest and Santander are all developing Open Banking Application Programming Interfaces (APIs), the technology used to securely share personal and business banking data with your consent.

Challenger banks have yet to join the initiative but are well represented at the OBIE.

From 13 January this year, newly authorised third-parties and the nine participating banking groups will collaborate to ensure that the rollout is managed. 

This is also the date that the broader European-wide legislation coined PSD2 (the Second Payment Services Directive) comes into effect. 

Does it stretch beyond financial services – booking a holiday, for example?

Absolutely.

Open Banking enables the initiation of payments by regulated third parties. As such, an e-commerce website might offer Open Banking as a method of payment. 

Again, this can only be done if the service operating in the ‘ecosystem’ there is fully authorised to do so by the FCA.

What about my data?

I know some customers are unsure about the risks that may unfold here.

Each customer-facing firm involved in Open Banking will be regulated by the FCA, thereby ensuring they have the correct protocols in place.

When using Open Banking capabilities via a third-party service, you’re always redirected to your bank to log-in and access your data or authorise your payment.

Customers will need to be vigilant about what’s happening. Don’t give out any details unless you’re sure your working with an authorised service. You can cross-check a company with the Financial Conduct Authority’s register if you’re in any doubt.

Good disclosure from third parties is very important too – things like FCA firm reference numbers and information explaining what happens to your data when it’s obtained and stored are a must.

The objective of Open Banking is to ensure customers have trust in the banks and services that are part of this initiative. They have all undertaken a significant amount of heavy lifting and information security compliance to participate in it.

What if I want to make a complaint?

If you have an issue with what’s going on or believe that something isn’t right, you can approach either the third party who provides the service – or your bank – to raise your concern.

The Financial Ombudsman is also involved so you can approach them if your issue hasn’t been resolved. 

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