- ‘Open Banking’ begins in the UK on January 13.
- The legislation required banks to open up data on customers to third parties and let them execute transactions on customers’ behalf — if customers agree.
- The change is meant to encourage bank account switching but its long-term potential could shakeup the way banking is done in the UK.
LONDON — An invisible, but important, change is coming to British banking from Saturday: Open Banking.
Regulators in Europe and the UK are ordering banks and credit card companies to share customer data with other companies if their customers agree. The companies will also be able to carry out payments on a customers’ behalf.
The changes are meant to encourage switching and comparison in UK banking but it also has the potential to fundamentally disrupt how banks operate and make it easier for rivals to compete.
Open Banking “could fundamentally change how we manage our money,” according to the project’s chief UK architect.
Here’s everything you need to know about Open Banking.
What is Open Banking?
At the moment, many startups wanting to access your banking data — transaction history, direct debits etc. — ask for your banking password and username, and then login on your behalf. Then they use relatively unsophisticated “screen scraping” techniques to harvest data. Some do plug directly into the banks but these are direct deals negotiated between startups and banks.
Open Banking forces lenders to offer a digital “fire hose” of data that any third party can use to get standardised access — provided the startup is registered with the UK Financial Conduct Authority (FCA) and the customer agrees to share their data. They won’t have to negotiate deals with banks, just plug into their digital systems and go.
“Companies have Read More Here