A new scheme called Open Banking now requires some of the nation’s largest banks to give its customers greater control over their current account data.
It means that customers will be able to share that data with third parties should they choose to do so. The idea is that this will make it easier for people to manage their finances, as they can see the overall state of their finances in a single place rather than having to log into a handful of different accounts.
Which banks are involved with open banking?
The Competition and Markets Authority (CMA) has instructed the nine biggest bank account providers in the UK to hand control of an individual’s banking data to those individuals. They are:
Allied Irish Bank
Bank of Ireland
Barclays
Danske
HSBC
Lloyds Banking Group
Nationwide
Royal Bank of Scotland Group
Santander
They were told to be ready by 13 January, however five have been granted an extension by the CMA.
What data can I share?
Initially Open Banking only applies to personal and small business bank accounts, though the idea is that this will be expanded to include other financial services such as credit cards.
It’s entirely up to you whether to share your data with any third party, and you can also revoke their permission at any time if you wish to.
How safe is open banking?
There are some services that already promise to bring together all of your various accounts into a single place, such as OnTrees and MoneyDashboard.
There is a key difference though – these services require you to hand over your account name and password, and they then pose as you in order to bring together your information. It’s called ‘screen scraping’.
In contrast, Open Banking uses application programming interfaces (API), which is basically a way for digital programmes to talk to each other directly, much in the same way that you can register for some online services using your Facebook profile.
This should be more secure.
What does this mean for mortgages?
At the moment Open Banking only applies to current accounts; you can’t share your mortgage account details with third parties, for now at least.
That’s not to say that there aren’t potential benefits for the mortgage process though. For example, if users are able to get a better grip on their finances, then saving for a deposit should be somewhat easier than is currently the case.
There are also hopes that if Open Banking gets people to overcome their inertia over switching bank accounts and service providers, then they will be more likely to do the same with their mortgage.
According to online mortgage broker Trussle there are around two million homeowners in the UK currently sat on their lender’s standard variable rate and so paying more for their mortgage than they need to.
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