Last month, a new banking directive quietly ushered in fundamental changes in the way that consumers are able to manage their personal finances.
Open Banking has forced the nine largest UK banks to allow third party companies access to their customers’ current account data, with the customer’s permission. This will enable a raft of new apps to use that information to provide them with personalised services that could help them, for example, to switch current accounts, to cancel direct debits or subscriptions or to change billing plans for gas and electricity.
But there are concerns the banks have not communicated these changes adequately – some even missed implementation deadline of 13 January – and there are understandable fears around the potential for security breaches and theft. These fears are unnecessary.
In fact, five key myths have been allowed to percolate in the minds of consumers and it’s high time these were busted.
Myth one: my bank can just give away my data
No, Open Banking is an opt-in initiative. No one can use your data without you explicitly allowing them to access it. In real terms, this is likely to mean signing up online to a service you are considering and typing in log in details to your online bank account.
Myth two: someone could steal my money
This common concern is based on fears around the security of your personal details. The reality is the vast majority of online services that emerge through Open Banking will use the same level of security as your bank.
All of your data, including passwords and account numbers, will be encrypted using the most advanced security measures so no one can eavesdrop on exchanges between providers and users, keeping your information safe and secure. If in doubt, simply ask the service what it is doing about security.
Myth three: if something goes wrong, I will have to pay for it
A key promise of Open Banking is that customers will never be left out of pocket if they become victims of fraud. If you suspect this has happened it will be best to talk to your bank, which will be obliged to fix any issue and give you your money back. It is the bank’s clear duty to recoup lost funds. Anyone holding your transaction data will need to be insured to protect you against any issues.
Myth four: I don’t have control over my data
In fact, you have more control than you did before Open Banking. Previously, your data was siloed with your bank. Now you are able to leave it where it is or share it with companies that offer value-added services your bank doesn’t offer. Plus, revoking access to these applications is easy. You can speak directly to the apps or you will have an interface within your banking app where you can manage all your connections in one place.
Myth five: Open Banking will be bad for my bank, as it will take business away, and that could be bad for me
Actually, Open Banking is likely to improve the way banks provide services.
Currently, they do everything from making one-off payments and cancelling direct debits to providing loans and offering financial advice. These services will become commoditised and opened up to a marketplace of niche providers that are dedicated to doing less but doing it better.
It’s a real opportunity for the banks to think about how they can compete by improving each of their products and services – using your data – so they are tailored your needs. Despite some glitches, including some banks saying they’ll miss the implementation deadline, most are reportedly onside.
By Peter Myatt, co-founder, Bean