Open Banking has been called a “financial revolution”, “the future of payments” and “the beginning of a new era in banking”.
These quotes make it seem like the greatest invention since the ATM. So what’s all this hype about? Is Open Banking safe for you, the customer? Can Open Banking protect you from fraud?
The short answer is: yes. In fact, it’s likely you’re already using an app or website that uses Open Banking to improve how you manage your money. Nowadays an increasing number of apps and fintech platforms use Open Banking to help people manage their finances and eventually make their lives easier. At iSpent19, we use Open Banking so you can take better control of your bank transactions.
What Is Open Banking?
Imagine if you could log into one website or app, and see all your bank accounts, retirement accounts and credit cards on one screen? You can now do that thanks to Open Banking.
Open Banking provides a secure way to share your financial information with apps, banks and other financial institutions. It came through as a regulation developed by the Competitions and Markets Authority (CMA) in an effort to increase competition amongst banks and improve customer experience. Since January 2018, the nine biggest banks in the UK have been working away on their technology to make their customers’ financial data shareable.
Thanks to Open Banking, you have more control over your financial data. Your bank app can integrate with other apps, and you can use these apps to manage your money, verify account information and even make payments. With iSpent19, for example, you can personalise your transactions, follow up on refunds and receive notifications whenever your insurance is up. You’ll also have more clarity over your bank transactions, which means you’ll notice any fraudulent transactions immediately.
How Is Open Banking Regulated in the UK?
In order to manage your money through a third party app, that app first needs to be licensed by the Financial Conduct Authority (FCA). This is a rigorous process with stringent requirements. Providers are under direct supervision of the UK regulator, which means your money and data have some of the highest levels of protection.
How Secure Is Open Banking?
Many people are worried about getting their bank accounts attacked by hackers. The good news is that the entire Open Banking ecosystem has been led, designed and is controlled by the UK government, and is in constant correspondence with licensed bodies such as the big UK banks.
Open Banking is a lot more secure than previous financial data sharing methods, such as “screen scraping” – or heaven forbid, Excel spreadsheets. That’s because Open Banking uses APIs: a type of software intermediary that allows two applications to talk to each other. When you use iSpent19, for example, your bank is “talking” securely to the iSpent19 app and that’s how you’re able to manage your money.
Not only are APIs more secure, but also you, the customer, have more control. With Open Banking, you have to give consent to the third party app, and you can tell what the third party is allowed to see and what it isn’t. Don’t want the app to see your other current account? Just turn it off. Easy peasy.
Thanks to APIs and the necessity for consent, Open Banking is the most secure way of sharing financial data.
How Open Banking bridges the Gap Between You and Your Banks
Financial transparency means you know what’s happening to your money at all times. This could be through instant notifications, more detailed transactions and better reporting. Essentially, Open Banking offers the tools to help you manage your money more efficiently. Now you don’t have to keep switching apps in order to check your balance on each one: you can simply connect it to a money management app that will display all your balances on one screen.
This makes it easier to track monthly spending, make secure payments and keep an eye on your transactions so you don’t miss anything suspicious.
Financial inclusion means providing equal access to financial services and products to everyone, including those who don’t have bank accounts or short credit histories.
By integrating with your bank account, third party apps and entities like mortgage providers have a real-time, clear view of your financial transactions as opposed to the often outdated data from traditional credit reports. This means they can get a much more accurate picture of your finances, which means a fairer score for you. All of these can translate into more accurate loans for those who need it.
It also enables much-needed financial management tools and a range of more personalised financial services for those who are in debt or not having typical nine to five jobs (think of gig workers, for example, who want to take out a loan).
With Open Banking, a money management app knows when you’re paid, when your mortgage payment is due and how much you need to save for your next holiday. Why not take this a step further and personalise it? The app could make sure your mortgage payment comes right after you get paid, so you never fall short. Or maybe it could automatically stock some money away every week so you can afford that holiday.
The fact is, the possibilities are endless. With Open Banking, iSpent19 allows users to personalise banking transactions for their needs, so that they can easily recognise fraudulent transactions, get automatic reminders for renewals and effortlessly split bills with housemates. And there’s a lot more coming soon…
No matter whether you think that Open Banking is a revolution or not, there is no denying that it’s changing the way we manage our money. Now that there is a more secure way of sharing financial data, you’ll be able to have more control over your money and your bank transactions, while enjoying better protection overall.
iSpent19 is a money management app that helps you keep track of your bank transactions – handy for following up on refunds, adding renewal reminders and keeping track of your expenses. We are designed to increase your daily productivity involving transactions. Interested in trying us out? Register to our Open Beta to check out our app!