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.
At Derbyshire Community Bank, we have recently introduced Open Banking to help speed up loan processing and make things easier for our members when we request bank statements to support a loan application.
With your permission, Open Banking allows us to securely access your statements online through a link authorised by you.
This access helps us carry out better affordability checks, identify fraudulent applications, and support customers who may already be in financial difficulty. It also makes the process quicker – removing the delays of waiting for statements to arrive by other methods – and reduces the time and cost of manually reviewing statements.
In short, Open Banking is a safer, faster, and smarter way to bank.
