Open Banking: Explained
You may have heard of a new few names recently in the world of finance and banking, which aim to help manage your finances better through using ‘Open Banking’. But what exactly is Open Banking, and how can it help you as a flexible worker? 🤔
What does Open Banking mean?
Open Banking is a set of regulations, adopted in January 2018, allowing third party providers to access your basic banking data.
Third parties were already accessing your data before January 2018, but via 'screen-scraping' your information. They did this by obtaining your passwords and logging-on to your online banking in a ‘read only’ format.
Open Banking is the secure and regulated way to give authorised providers access to your financial information.
These authorised third parties will be regulated by the Financial Conduct Authority (FCA) or another European regulator, and will appear on the FCA's Register.
What is Open Banking used for?
It’s a super useful piece of tech because it allows financial empowerment platforms - like Portify - to work even quicker when providing you with the products, or tools that you need to achieve financial wellbeing.
The idea behind these changes is that they'll bring more competition and innovation to financial services which, in turn, is hoped will lead to more and better products to help manage your money. It could also give you a more detailed understanding of your accounts, and help you find new ways to make the most of your money.
How can Open Banking benefit me?
They provide you data-driven insight into your finances that would be challenging to have an overview of otherwise. Lets say, for example, you get a coffee on your way to work everyday. You may think ‘but it’s only £2.50’, and barely notice it on your weekly bank statements. Open Banking allows you to see how much that is on a monthly basis, and suddenly by making small changes you’re making huge savings*.
They can also add up and average out your spending on bills and food, so you can see how much is actually left over to spend. Because this can be done across multiple accounts, you’ll get much more precise amounts than by simply estimating.
* FYI, if you bought a coffee each work day for a year, it would add up to over £600!! Think of the things you could do with that money… suddenly that saving doesn’t seem so small!
What data do Open Banking apps use?
Open Banking apps only have access to your banking data, such as transactions and direct debits (basically, whatever appears on your statements), and not anything personal (including passwords) that your bank might know about your financial or living situation.
The regulations also state that Open Banking apps have to use APIs to access your data (see the section on APIs below), and this is the most secure way of sharing your data and ensures that only the data you give permission for can be shared.
What if you don’t want to make use of Open Banking?
You don’t have to share your data if you don’t want to! Open Banking is a strictly ‘opt-in’ service and will only change the way your data is shared if you give express permission for the change.
What are APIs?
API stands for application programming interface and is essentially the way in which different systems communicate with one another and share information.
APIs are what is used to let you securely share data between sites or apps on the internet. They are what is used by platforms such as Deliveroo when it accesses your location through Google Maps.
They mean that one company can access specific data that another company has, without you sharing your passwords with anyone. Before anything like this can happen you will be asked for your permission and you should always check exactly what you are giving permission for.
For more information on how Portify keeps your data secure, read here.