Your financial information, such as what you spend and where, and how often you go into debt is private. It is information only available to you and your bank. It has been like that for years, but all that is about to change.
Customers of nine of the biggest UK banks have received letters and emails in recent weeks informing them that their information can be shared, securely, with other firms. All they need to do is give their permission.
The UK’s competition watchdog says this so-called Open Banking regime will revolutionise many people’s financial lives, helping them get better deals.
Your financial data is valuable. For example, a loan provider would be keen to know exactly when you go into the red each month.
So far, this information – or data – is held by your bank. In the past, they may have been keen to sell you other products, such as overdrafts at a certain interest rate. Most people stay loyal to their bank. The Competition and Markets Authority (CMA) found that only 3% of personal customers move their accounts each year.
The theory of Open Banking is that such data is owned, not by the bank, but by the customer. He or she can share it electronically and get a better deal on financial products, such as getting a cheaper overdraft elsewhere.
A new set of EU rules will require banks, building societies and other financial providers to let customers easily and securely share this financial data with other banks and other regulated financial businesses.
The CMA is also forcing the nine largest current account providers – Allied Irish Bank, Bank of Ireland, Barclays, Danske, HSBC, Lloyds Banking Group, Nationwide, RBS Group, and Santander – to have such a system ready by 13 January. Questions have been raised about whether they will all be ready in time.
In practice and in time, customers will probably see a dashboard on their bank’s mobile phone app.
This will show them how much money they have in their different accounts, with different banks, and eventually how much they owe on credit cards and store cards too.
They will also be able to switch on other services. So, a business separate to the bank might take money left over at the end of the month and invest or save it. Another may look at how much you spend on broadband and offer to switch you to cheaper deals. Another may spot unusual transactions from someone with mental health difficulties and alert a carer.
Crucially, these services will have access to the data, but will not have the login and password details to your account. A customer can switch off these services whenever they want.
A set of computer programming rules in the UK, called Application Programming Interfaces (APIs), will ensure all these new services and banks to talk to each other.
All of these providers will be regulated by the Open Banking regime under Financial Conduct Authority rules.