Your Guide to Open Banking

Posted by Jamie Mackenzie Smith in Personal Finance on 15 January 2018

On 13 January, the UK banks embarked upon arguably one of the biggest changes to personal finances since the introduction of computers. Open Banking is aiming to make it easier for banks, lenders and consumers to access and share information, with a view to creating new products and opportunities through innovation and increased competition.

The UK’s biggest banks had been given the mid-January deadline to facilitate access to certain types of data, following a year of collaboration and development.

Behind the scenes there’s been a lot more to it than that, involving the way your personal data is handled and distributed, making sure that your data is secure at all times.

How does Open Banking work?

Open Banking takes the tried and tested principles of data sharing to assess your information and put it before banks, lenders and prospective companies. In theory it should make the process of switching accounts and applying for products that bit faster, as all your information is available for the bank or lender to view.


Say you’re shopping around for a mortgage. Unless you're signed up to Open Banking, you’ll have to fill in all your personal information, provide proof of income and potentially have to pass further checks for each mortgage lender you approach. With Open Banking, this information could be available for lenders to see at the press of a button (as long as you have given permission), so you’re not having to provide the same details over and over. This not only saves you time, but will cut down on the processing time taken by the lender.

A particular aim of the initial launch is to make it easier to switch current accounts, with the average account switch rate at around 3%, according to the CMA.

According to the EU Commission, benefits for consumers include:

  • Eliminating surcharges like booking fees on most card payments
  • 8 weeks unconditional refunds on direct debits
  • Reduced costs to customers in the event of fraudulent transactions
  • Better protection from more secure payments

This also paves the way for new money apps to open up. The full potential of Open Banking isn’t likely to be realised for a couple of years, partially due to the fact that app makers still need to experiment with the platform, but also because it is launching with some limitations in place to keep it easy to maintain. Initially the service will only assess data from current accounts, but other products are likely to benefit from Open Banking’s functionality in the future as more people, companies and start-ups adopt the platform.

What if I don’t want my personal information shared?

That’s fine too - you have to opt in to Open Banking, rather than opt out. If you choose to use any money-managing apps, they may prompt you to grant permission for them to access your information via the initiative.

You can also opt out whenever you like, but you will probably lose any app functionality that involves your financial information in doing so. On top of that, you’ll need to re-confirm your authorisation every three months, preventing un-used apps from making payments or accessing your information without your consent.

Are there any drawbacks?

It’s difficult to say initially until Open Banking has been around for a bit longer, what issues will be faced in its early days; that’s not to say the finances of early adopters are in danger, but speculatively, things are rarely perfect on launch.

As with any new system, it’s likely that there will be issues to sort out, such as compatibility issues between specific apps and lenders, as well as security and verification teething issues. In fact, five out of nine banks signed up won’t be ready for the 13th of January launch due to issues getting it to work with their system, so you may not be able to use it right away.

Inevitably, this ease of accessing user information will be used by companies to make it easier for them to market new products to individuals and as some consumers might find the extra knowledge unnerving. Better product targeting isn't necessarily a bad thing, but it does present yet another way for your own data to be used. It just means as ever, it’s worth doing your homework before making any big commitments.

Really, it can be viewed as a two-way street: it’s easier for you to find deals and apply for credit, but it will mean giving consent to share more of your personal information.

How is it regulated?

All companies that want to take part in Open Banking need to be authorised by the FCA to ensure that consumers are treated fairly. Security will be at the forefront of developments too, as those involved seek to overcome natural consumer concerns. Given that a driving desire behind the initiative is to encourage innovation - particularly amongst start-ups, it's important that over-regulation doesn't itself become a barrier to participation.

Open Banking has come about to comply with a European-led legislation to enhance customer protection, while encouraging competition between companies called Second Payment Services Directive (PSD2).

Ultimately, data security is at the heart of Open Banking, which is why it has to be so heavily regulated. But as with anything 'new', consumer trust and engagement won't be universally forthcoming from day one.

In summary

Open Banking is still very much in its infancy and its full powers and usefulness are probably a couple of years away from being realised. As more and more people and companies start to adopt the system, it’s only natural it will grow and change to adapt to this.

There are undoubtedly going to be some exciting developments that change the way we think about finance, but we also shouldn’t expect to see them happen overnight.

Which Credit Report Information Can Landlords See

Whenever you rent a property, you will be required to pass some checks set by the landlord or letting agent to prove that you will be a good tenant and that you’ll be able to afford to rent the property.

Published on 19 Mar 2018 by Kevin Pearce

Full Article

Do Student Loans Affect My Ability to Get Credit?

For many people, a student loan is the single largest chunk of borrowing they ever take out, second only to a mortgage. With course fees alone now coming to more than £9,000 per year and then the added maintenance loan on top of it, you can easily end up borrowing £40,000 during your studies.

Published on 8 Mar 2018 by Jamie Mackenzie Smith

Full Article

How Far Back Can I get my Credit History?

For your recent payment history information, your credit file has everything you need; that’s why it’s given so much importance by lenders whenever you apply for credit. But if you’re looking for information that’s six years old or more, it’s probably not be the best place to start.

Published on 7 Mar 2018 by Jamie Mackenzie Smith

Full Article

Are Car Insurance Premiums Calculated Fairly?

Recently news stories have emerged alleging that a “John” might be more likely to get a cheaper car insurance quote than a “Mohammed”, and that someone with a Gmail account could be offered a lower premium than someone with a Hotmail email address.

Published on 12 Feb 2018 by Jamie Mackenzie Smith

Full Article

The Cost of Incorrect Information on Your Credit Report

Your credit file is compiled from a number of different sources, including payment history from each of your lenders (past and present) and public data as reported by local authorities and courts. The majority of people find that everything held about them is correct, but due to the large amount of information being shared, errors in the information reported can happen, which can lead to issues when you go to apply for credit.

Published on 2 Feb 2018 by Tom Blandford

Full Article

HMRC Bans Credit Card Tax Payments

From 13 January 2018, it will no longer be possible for consumers to use a personal credit card to make a payment on HMRC’s Self-Assessment tax portal. Historically, this has been a popular option as it allows what is often a considerable sum to be deferred.

Published on 12 Jan 2018 by Tom Magor

Full Article

How to Get the Best Deal When Buying a New or Used Car

Buying a new car is both exciting and expensive, but if you know where to look and when, you can grab yourself a bargain. If you take a little time to look into finance or loan deals as well, you can bring down the overall costs significantly.

Published on 11 Jan 2018 by Kevin Pearce

Full Article

Are football clubs exploiting their fans

With Premier League teams under huge pressure to remain in the top flight of English football, the amount lavished on transfer fees and player wages have soared in recent years.

Published on 8 Jan 2018 by Sam Twyford

Full Article

What The 2017 Autumn Budget Means For First-Time Buyers

Wednesday’s autumn budget brought great news to would be first-time homeowners: if you’re buying a home up to the value of £300,000, you won’t have to pay stamp duty for the property. This, the Conservative Party estimate, will benefit 80% of first-time buyers, saving them potentially thousands of pounds on the total cost.

Published on 28 Nov 2017 by Jamie Mackenzie Smith

Full Article

Blacklists - Ten things you probably didn't know

1. Blacklists are not unlawful. No lender is compelled by law to give credit or to give any reason when declining credit. Each may consult several sources of information before making a decision, including any form of list that may exist. Any list containing personal data is automatically regulated by the Data Protection Act 1998.

Published on 9 Oct 2017 by Barry Stamp

Full Article


We have loads of great customer reviews