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The way we bank in the UK will change forever this weekend, but very few customers are even aware of the radical shake-up our personal finances are about to undergo.
From Saturday — with customers’ permission — banks will be able to open archives of spending data collected over many years and share access with other financial services providers, from technology groups to retailers.
The new rules, called Open Banking, aim to bring more competition into the marketplace. The idea is that by sharing our data with financial providers, they will have a better understanding of our spending habits and will be able to provide a more personalised service.
As a result, companies should be able to come up with more innovative and competitive deals on products including mortgages, overdrafts, insurance and broadband.
All UK banks are required to comply with the new rules, but not all are ready. Last month, it was reported that five of the largest current account providers would not be ready for the changes in time for Saturday’s deadline. Barclays, RBS, HSBC, Santander and Bank of Ireland have been given an extension by the Competition and Markets Authority (CMA) to get their systems compliant. Lloyds, Danske, Nationwide and AIBG are all ready to start.
Imran Gulamhuseinwala, trustee of Open Banking, said he expected to see new products emerging from the traditional high street banks alongside new entrants to the market.
“New ways of managing money, of making life-changing financial decisions, of paying for things will appear,” he added.
In theory, the changes will mean banking becomes simpler. Customers should — providing they give their permission — be able to open a banking app for one account and see a list of all their accounts, even those with other banks. Users will be able to authorise third parties to access their banking details without having to provide login details. Customers decide which information they are happy to share with which provider, and the length of time they are willing to share it for.
“Initially, Open Banking will make it easier for consumers to compare the details of current accounts and other banking services, but over time more online applications will be launched,” said Edward Maslaveckas, chief executive and co-founder of thisisbud.com, a platform aggregating financial services.
“Open Banking will help individuals to focus on personal finance management such as analysing fixed payments and identifying where they can save money. Other benefits could include debt management tools such as overdraft alerts and recommendations for better products,” he predicted.
Victor Trokoudes, co-founder and chief executive of Plum, a chatbot that allows you to put money into savings automatically, was in agreement. “Up until this point, financial service providers have been purposely vague about the true cost of overdrafts, borrowing, FX, and insurance,” he said. “Open Banking means that this information can be made very clear via the data in people’s bank accounts.”
He anticipates a host of new providers coming to the fore. “These will be different to traditional banks, acting more like advisers to people’s financial lives — from saving, to investing, to finding the right financial products,” he said. “Users will still use their current provider to transact, but will manage everything else via this new wave of ‘added value’ providers that are focused on offering services that make their users better off.”
The rules have been welcomed by Which?, the consumer group, which said it would encourage customers to switch accounts. But others expressed concern that Open Banking could lead to an increase in bank transfer scams, triggered by how personal information is stored by the banks. Any company offering services must be regulated by the Financial Conduct Authority and enrolled on the Competition and Markets Authority’s Open Banking database.
“Compliance with the strict rules underpinning FCA authorisation and Open Banking should be the number one concern of companies building apps, services or products,” said Francesco Simoneschi, chief executive and founder of TrueLayer, a provider of financial application programming interfaces (APIs). “This can seem like a daunting prospect with the capacity to eat up a lot of time and resources that should be directed towards product development.”
Managing your money online
A number of apps and services have been launched that will link to customers’ bank accounts via Open Banking to help them to make the most of their money.
Bud This platform aggregates financial services so small businesses and consumers can manage their finances in a single place — their bank account. Partnered by First Direct its app trawls through thousands of deals from third-party providers to recommend the best offers on mortgages, broadband and energy deals among others. By analysing customers’ individual spending and saving data, the app will decide whether a certain cashback credit card deal will be right for a particular customer, or whether they might be better off going for another product.
Yolt This app, backed by ING, the Dutch bank, allows customers to view their credit card, banking and savings accounts in one place.
Plum This chatbot analyses your income and spending habits to see how much you can afford to save. It then transfers small amounts of money into a separate savings account.
Bean An online personal assistant that connects to individual bank and credit card accounts and tracks regular payments, including subscriptions and household bills, alerting users to opportunities to switch or cancel. New features planned for the app include a system that predicts when users might dip into their overdraft days in advance of the actual event.
Coconut A business current account that allows freelancers to track the tax they owe in real time. It also helps them manage client payments and expenses. Real-time previews could help freelancers avoid nasty tax surprises at the end of the year. Customers can manage and track their income and outgoings via an app, and it even gives reminders of tax deadlines and the end of the financial year.
Fluidly This technology plugs into accounting packages and bank accounts to help small businesses get paid faster. It predicts customer’s financial futures with automated cash forecasting and even claims it can spot financial opportunities.
Chip A free savings app that links to your current account. When you sign up, you grant Chip access to your transactional data. An algorithm then analyses your spending habits to work out what you can afford to save, every few days.
Trussle This online-only mortgage broker’s switching alert lets users know when they should remortgage to find a better deal. It monitors factors including the value of the home and fees for an early exit and new deal, to identify when the time is right — usually towards the end of the term. The remortgage application can be completed online.