Banking's revolution

Open Banking is a Government-backed initiative, spearheaded by the Competition and Markets Authority (CMA) to encourage greater competition between banks and offer consumers better value for money.

More than 33 million people are expected to sign up by 2022, according to new research from PwC, but many fear doing so will increase their exposure to fraud, saying they would rather share their personal medical history than their bank account details.

How open are you willing to be?

OPEN GOAL

Open banking puts you in control of your personal financial data and makes it easier to check if you are getting the best deals.

David Black, banking specialist at DJB Research, said: “You could open an app or website and see all your current, savings and credit card accounts in one place, and run them across a single digital platform on your laptop, tablet or phone.”

Currently, banks typically only sell their own services, but in future they will also offer apps and services from other providers, anything from a savings account to mortgage advice, or even broadband, gas and electricity.

You can also share your data with the new breed of financial technology or “fintech” firms and phone app developers, such as Atom, Revolut, Starling and Yolt.

If you decide their products and services are better, you can switch with just a few clicks.

APP HAPPY

Rachel Springall, finance expert at MoneyFacts.co.uk, said a debt management app could recommend a better current account with lower charges, based on your personal usage, or it might discover that while your current account is comfortably in the black you owe money on a credit card, then alert you to switch funds.

Somebody who is struggling to save for a specific goal could share their current account transaction history with a budgeting app.

Springall said: “This could suggest ways to cut your spending, say, by getting cheaper deals on everyday services.”

MoneyComms.co.uk founder Andrew Hagger said open banking could also help mortgage applicants: “You could give an online broker access to your bank account, so they would know details of your income and outgoings, saving you from having to supply payslips or bank statements.”

SLOW GOING

So far the CMA has ordered nine of the biggest banks to open up their information: HSBC, Barclays, RBS, Santander, Nationwide, Bank of Ireland, Lloyds, Allied Irish Bank and Danske.

Dozens of fintech firms and app providers have applied to City watchdog the Financial Conduct Authority (FCA) for the right to handle data, but the process has been sluggish.

However, Yolt is expanding rapidly, with 300,000 registered users who can view transactional data across 33 banks and cards including HSBC and Lloyds, as well as digital banks Starling and Monzo, and is regularly adding more.

WORRIED

A bigger problem is public scepticism, with almost half naming security as their biggest concern, the PwC report shows.

Consumer group Which? has warned that regulators and industry must protect customers from data breaches and scams to build trust.

The system will have plenty of software and security safeguards, with data encrypted and tracked, under the watchful eye of the FCA.

Hagger said that you also need to give permission for any company to access your data and expressly authorise your bank to supply it: “You are not obliged to opt into data sharing and, crucially, can revoke your consent at any time.”

Another challenge is that many will still find the concept complicated.

Open banking may excite some early adopters, but for many more, it remains a closed book.