Open banking could mean better banking choices

9 January 2018   By Thomas Henry

NINE current account providers will soon start sharing customer data with third parties.

bank of england
Credit: William Barton/

Open banking is intended to deliver more competition and improved customer choice in financial services, through the sharing of customer data.

Allied Irish Bank, Danske, Lloyds Banking Group and Nationwide will start sharing data from 13th January 2018.

But five of the nine banks - HSBC, Barclays, Santander and Bank of Ireland - have already been granted an extension to comply with the changes.

What is open banking?

Open banking is a new approach to managing financial data. It describes systems and standards that allow other companies to access bank or building society data.

It sounds simple enough but it could lead to a dramatic improvement in the number and variety of financial services that are readily available.

This could be as simple as better-personalised price comparison on traditional financial products including mortgages, credit cards and insurance, but it could encourage innovation in financial services and the creation of new services that could include cryptocurrencies or peer-to-peer networks where people could accept bids on their debts and credits.

The UK is the first nation in the world to launch open banking, after the Competitions and Market Authority (CMA) found that the big banks weren't competing hard enough for business, recommending new opportunities for innovation, transparency and competition.

Is it safe?

There is concern about open banking, and it's easy to see why. We've always been warned against sharing our financial information, so what's changed?

The main technology behind open banking is Application Programming Interfaces, a fairly well-established communications technology. Any company using the new systems to deliver financial services must be authorised by the Financial Conduct Authority (FCA) or another European Regulator.

Open banking has a lot to offer but there is a chance it could be used to commit bank transfer fraud, or to be used deceptively in terms of price comparison. Regulators need to do more to reassure people about the changes.

When can we benefit from open banking?

For the first six weeks companies offering open banking services will limit it to a small group of customers in order to ensure that authorised third parties are working properly, and that they can cope with demand.

The Open Banking Implementation Entity, responsible for leading the programme, say that open banking will be available to "the overwhelming majority of personal and small business current accounts" by the end of the roll-out.

For now the changes only apply to personal and small business accounts, but the Chancellor of the Exchequer's November Budget announced an extension of Open Banking standards to all products with payment capability including credit cards and e-wallets over the coming years.

HSBC began trialling an open banking platform with 10,000 customers back in October 2017, and are expecting to roll out a new version for all customers later in 2018.

The body overseeing the change, the Open Banking Implementation Entity (OBIE) has issued fresh guidance and aim to complete the programme in March 2018.

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