This might be a term you have heard about, but it wouldn’t be a surprise if you haven’t.
So what is Open Banking?
Open Banking is a series of reforms to how banks deal with your financial information, called for by competition watchdog the Competition and Markets Authority (CMA). It comes alongside a new regulation with the snappy name ‘the second Payment Services Directive’ (PSD2), which also came into force on 13 January 2018.
In plain English, together they mean all UK-regulated banks will have to let you share your financial data such as your spending habits, regular payments and companies you use (basically your bank, credit card or savings statements) with authorised providers offering budgeting apps, or other banks – as long as you give your permission.
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.
For example, you could connect your bank account to an app that would analyse your spending and recommend a new product like a credit card or savings account to save you money, or sign up to a provider which displays all of your accounts with multiple banks in one place so you have a better overview of your finances.
How we use ‘Open Banking’ at Derbyshire Community Bank?
At Derbyshire Community Bank we have recently launched Open Banking to help speed up loan processing and to make it easier for our members when we request a bank statement to support their loan application.
Open Banking, with your permission, allows us access to your statements online through a link authorised by yourself.
Access to such data will facilitate better affordability checks and will help identify fraudulent applications as well as potential customers who are already in financial difficulty. It speeds up the process, rather than having to wait for statements to be sent via other methods and having our underwriter poring over bank statements is expensive and time-consuming.
Clearly if you do not consent there is an option for you to upload your bank statements manually, email them across to us or drop into branch.
However Open Banking makes it easier, quicker and is a smarter way to bank.