Finance has just moved into the digital age and you probably don’t even know it!
Don’t worry, if you’ve never heard of the term ‘open banking’ before! It’s a relatively new concept but one that could very much affect you and your money, so here’s everything you need to know.
What is open banking?
The new open banking regulations mean that banks need to let third parties, like as tech companies, access your financial data – but only with your consent first. This new rule came into effect on 13th January and could revolutionise the finance industry.
Open banking should allow for more start-up tech companies to create exciting and unique budgeting and money management apps – helping you to save money and generating greater competition within the financial industry.
Examples of open banking
Open banking usually comes in the form of an app or chatbot. And while there are many different styles and versions, they all have the same aim – to give you upper hand in the financial world. The main apps around now are:
Whether you bank with Barclays, Halifax, HSBC, or all three, it lets you manage all your accounts and credit cards in one place. You can see your payment history which is split it up clearly in categories, without juggling multiple apps.
This is also a money management app but in the form of a chatbot. You can talk to Cleo through Facebook messenger – just think of it as your own personal finance assistant available 24/7. It can tell you what your account balance is, break down your spending for you, help you save for a holiday, and much more.
If you want to save more money, Chip is for you. This app intelligently calculates what you can afford to save based on your spending habits. It then automatically transfers that money from your current account to a savings account, ensuring you stay on track with your finances.
Bean ensures you’re not spending a penny more than you need. It analyses all of your transactions and recommends better deals – such as switching to a different energy supplier, getting cheaper pet insurance or swapping credit card debt to a zero interest card. There’s also Mespo which is the chatbot equivalent, located in your Facebook messenger.
So what does open banking mean for you…?
Open banking is expected to encourage innovation in the finance sector, meaning you will have access to personalised finance apps. And these apps should make it easier for you to take advantage of better products, services and deals – as well as help you to manage your money more effectively.
It is also hoped that it will encourage people to switch bank accounts more frequently. A study found that only approximately 1% of the UK population made a switch between July 2016 and June 2017 – meaning that many could be left with an account which is no longer right for their needs.
Is my data safe?
Yes, IF the third party is registered with the FCA which you can check here. Some companies are still yet to be authorised as it’s a relatively new area of finance, but this doesn’t necessarily mean your data is at risk as they could already adhere to other forms of regulation.