Last Saturday (13th January), the way we bank potentially changed forever, as banks became able to share your bank account information with other financial service providers. Although information can only be shared with your explicit permission and at the moment only a few banks have got their systems compliant, these changes mark the start of a banking shake up.
The new rules, known as ‘Open Banking’, aim to bring more competition to the market. The idea is that by sharing our data, financial service providers will be able to get a better understanding of our spending habits and therefore will be better placed to provide a more personalised service.
Initially, Open Banking should make it easier for consumers to compare current accounts and other banking services, but over time more online applications and tools could become available to help personal finance management, including identifying where money can be saved. It is important to highlight again that no access will be given to your accounts, unless you provide express permission.
For those of you keen to know more, you may see these new services referred to as Account Information Services (AIS) or Payment Initiation Services (PIS). From 13th January, companies who offer AIS and PIS must be authorised or registered by the Financial Services Authority (FCA), although companies that have been providing these services since before 12 January 2016 do not need to be authorised by the FCA until the end of 2019, so may not appear on the FCAs register until a later date. As Open Banking progresses and evolves, this should be revolutionary but as ever its important to make sure you know who you are giving your permission too. The FCA has provided the following words of warning on its website:
Before you use one of these services be alert, and make sure you are confident that any organisations you share your information with are who they say they are. You should make sure that you understand the service and that you are happy with who will be providing it to you.
Giving consent for access to account data
When you sign up with a company for account information services, the AIS provider should give you enough information to understand the nature of the service being provided and how it will use your data, including whether it will share your data with anyone else.
Sharing security details
Currently, businesses that provide AIS and PIS often ask you to share your bank security details with them, such as your login and passwords.
Under existing data protection law, these businesses must protect your data and PSD2 will require these businesses to put further measures in place to keep your credentials safe and secure.
Your banking terms and conditions should not prevent you from sharing your credentials with regulated AIS or PIS providers. Your bank cannot hold you responsible for unauthorised transactions just because you have shared your credentials with regulated AIS and PIS providers.
Currently and at a very simple level, Open Banking should allow consumers to view all of their savings and investments in one place, to give them an easy real-time view of their entire financial situation.
We have already seen a number of savings apps launched, that link with customer bank accounts via Open Banking and use algorithms to analyse spending habits in order to work out what you can afford to save and then automatically transfers that amount into a savings account. While this is a really useful tool that will enable savers to determine what they can afford to save and help those that never get around to opening a savings account to actually get started - it is important check the rate of interest being offered on the account that your savings are automatically transferred into.
Our research to date has not found any best buy rates – so while we are always in favour of any resources that help people get saving, it is equally as important to ensure you make your savings work hard for you and that means making sure you have an account that earns the most interest.
For more information on the best rates in the savings market, please take a look at our independent best buy tables.