…Or lead to possibilities and benefits for you?
Have you saved by switching your bank account?
Martin Lewis from moneysavingexpert.com is among many advising us to switch our bank accounts. How easy is it to find out which account would be best for you and your individual situation? If you had access to a comparison site like those for Insurance products and energy providers would that help?
September 2015 – As Queen Elizabeth II became Britain’s longest-reigning monarch, the HM treasury asked for an *Open Banking Working Group (OBWG) to be set up to explore how data could be used to help people transact, save, borrow, lend and invest their money.
Setting up the *Open Banking Standard which the OBWG are exploring and defining, will make it possible to share data that banks have historically held – the sirens in your head may be going off at this point, I know they were in mine. Bear with me, I will come to security. – This will improve people’s banking experience. When the data is securely shared or published openly using open *Application Programming Interface (API’s), it can be used to build useful applications and resources to help people find what they need. Customers can look for a mortgage more easily. Banks can find customers matched to a new product. Businesses can share data with their accountants. This, in turn, will improve efficiency and stimulate innovation over the next two years.
If I still have your interest, here are more ways the Open Banking Standard will benefit individuals, the industry and businesses?
There are specific real-life benefits that could come from making it easier to share banking data.
“Customers could compare and save on current accounts”
Comparing bank accounts is not easy for customers. If there were a way we could access a price comparison service, it could suggest the best options for your individual needs. You can make significant savings and receive the financial bonus for switching to the current account best suited for you – savings in the region of £70. Switching overdraft facilities could save you more, an average of £140 a year.
“Providers could use it to better target their loans”
This type of service could also apply to financial products such as credit cards, mortgages and loans. You can compare these now, but without your history and detail of how you manage your account. If lenders could offer borrowers better terms for loans based on use of historic transactional data to determine someone’s risk level for paying off a loan. Currently this data is only available to a customer’s account provider, which means third-party lenders may not be able to offer the best terms to people looking for a loan.
“Small businesses could save time on their online accounting”
Many small businesses use cloud-based platforms for bookkeeping but generally have to input their transaction data manually. An API from their current account provider would make it easier to reconcile payments – all a business owner would need to do is log into their accounting platform, select relevant bank accounts and give their permission for the data to be shared.
“Fraud detectors could monitor multiple accounts”
Fraud costs the UK economy over £570m a year, according to the National Fraud Authority, and people have come to rely on their bank to notify them of fraudulent activity on their accounts. With securely shared transaction data, third party fraud detectors could offer customers better monitoring and notification services.
With sophisticated tools, they could aggregate data across multiple accounts or products to spot patterns that a single product provider would not see.
Security of your data
The sharing of your transaction data could only occur through an open API. With that comes risks. We have all seem the headlines when company’s loss data or it is stolen. Trust can only be developed if we (the banks customers) know who carries the risk when something goes wrong. To help with building the trust, transparency as to the liability, privacy and security rules that will underpin the open standard need to be established and communicated to customers in a clear and understandable manner.
Also coming into force before the Open Banking Standard starts sharing your data, is the General Data Protection Regulations (GDPR) this adds to individual’s protection. With stringent terms on how your data must be protected, otherwise there are severe penalties for organisations. More information can be found at: https://lizhendersondata.wordpress.com/2016/12/24/gdpr-are-you-aware/
The Open Banking Working Group (OBWG) – a collective of banking, *open data and *FinTech professionals – has been formed at the request of the UK Government. Its aim is to develop a framework for adopting an open API standard across banking and explore how open banking will impact consumers, regulators and industry.
Open API – An Application Programming Interface (API) is a proven technology that can help provide access to open data (such as a list of products that a bank provides) and secure shared access to private data (such as a list of the transactions in an individual’s bank statements). Data accessed via an open API may be closed, shared or open. Open APIs, for the applications described herein, need to be supported by robust security, legal and governance frameworks.
The Open Banking Standard – A guide for how banking data should be created, shared and used. The open standard is developed and maintained collaboratively and transparently, and can be accessed and used by anyone.
Open Data – Data exists on a spectrum, from closed to shared to open. Open data is data that anyone can access, use or share.
Fintech – Financial technology, also known as FinTech, is an industry composed of companies that use new technology and innovation with available resources in order to compete in the marketplace of traditional financial institutions and intermediaries in the delivery of financial services Financial technology companies consist of both start-ups and established financial and technology companies trying to replace or enhance the usage of financial services of incumbent companies. https://en.wikipedia.org/wiki/Financial_technology
For further information: https://theodi.org/open-banking-standard
Image credit: https://www.gov.uk/government/news/cma-paves-the-way-for-open-banking-revolution