Open banking is an exciting new piece of financial technology being promoted across the UK, which makes it easier for you to share your banking information with other companies and provides in a secure way. The government have been promoting it for a few years now, since an investigation found that the challenge of sharing information between financial organisations was damaging consumers. However, it still hasn’t got the widespread awareness that we think it deserves.
Is it safe?
Before we get to the benefits, a quick word on security. Open banking actually makes it a lot safer to share your banking details with third party companies such as budgeting apps. As long as the company is authorised by the FCA, your money will be protected by your bank. You can check who’s authorised here. Open banking shares access using APIs, which allow you to validate access to your account without handing over any log in details. It also limits how much information is actually shared. All told, there aren’t any security red flags, and the FCA protection gives you an extra layer of security just in case.
Three ways to take advantage
Get help with budgeting
Open banking has cleared the path for an exciting range of money management apps and chatbots. By giving these tools access to real spending information, you can get advice that is far more accurate. Although some banks build these tools into their own apps, a dedicated financial planning app is likely to have a lot of extra features. More importantly, it will let you see everything in one place.
Better price comparison
Price comparison sites save you time and money by finding different quotes based on the details that you put in. They’re a great tool, but the quotes you get aren’t always 100% accurate as a range of factors can affect the final price. By using an FCA site that’s signed up with open banking, you can see offers based on your real account history.
Automate your savings
Recently there has been a flurry of apps launched to help you save money. By taking small sums of money out of your account automatically at predefined intervals, they make it easy for you to start building up a small savings pot. Some let you save in other innovative ways, too, such as ’round-ups’, which round your purchases up to the nearest pound and save the difference. Many of these are powered by open banking, and they are an interesting option for anyone who has struggled to save.
This is really only the beginning of open banking, so time will tell what new and interesting tools we’ll see in the future. It’s also good news for small businesses: many open banking developers are focusing on developing apps to help SMEs manage their money more efficiently. Even more exciting is the fact that entrepreneurs with an idea for how to make financial management more accessible now have a tool for doing so.