What is Open Banking, and why does it matter?
Open Banking is an initiative designed to improve and enhance everyone’s banking experience. The core idea of Open Banking is that you can provide banks and other online providers with secure access to your account(s) so that you can manage your current accounts in a way that is better suited to your needs. If customers have multiple current accounts they will be able to see those accounts all in one place.
Open Banking has, first and foremost, been developed with the consumer in mind. Increased competition leads to originality and creativity, with organisations incentivised to launch offers and services that set them apart from the competition. This means that the consumer benefits from personalised deals that match their needs.
However, it is also worth noting that Open Banking is not obligatory. Those who want to take advantage can, but it will not be forced upon anyone. All banks however, will need to conform and consumers can only benefit if they have online banking.
The Competition and Markets Authority (CMA), a non-ministerial government department responsible for strengthening business competition and preventing anti-competitive activities have introduced Open Banking to increase competition in banking.
From January 13 2018, banks must allow customer data to be shared with FCA approved financial organisations and third party providers. Data will only be shared if the customer gives consent for their data to be shared. If they don’t want to they don’t have to do anything, their data will never be shared without their explicit consent. All of the UK’s major banks are working together to ensure a consistent approach to the sharing of data that will allow Open Banking to be introduced seamlessly.
Of course, Open Banking would not be viable without robust security measures having first been put in place. Providing banking services that are efficient and safe is of the utmost importance, and protecting the details of customers is fundamental.
Since early 2017, Royal Bank of Scotland has been liaising with a number of other major banking firms to develop Application Programming Interfaces, more commonly referred to as APIs. APIs enable information and data to be shared securely, and are tested thoroughly and regularly to ensure maximum levels of security.
As well as benefiting individuals, Open Banking is set to transform how small businesses manage their finances. The new APIs will make payments faster and easier, while banking providers will be doing all in their power to ensure services and products appeal directly to SME owners.
If you would like to learn more, you can visit the dedicated Open Banking website.