Open banking – what is it and why’s it important?

More than one bank account or credit card? Using different companies for different financial needs? Wouldn’t it be great if you could see it all in one place… Enter open banking. 

What is open banking?

Open banking is a relatively new development that allows you to give permission for regulated financial institutions to access your accounts, credit cards and e-money accounts across different providers, so you can see them all in one place.

For example, if you happen to bank with Barclays and use its online banking or mobile app, you can give it permission to access data from accounts with other providers you’re with, and it will all be accessible through your Barclays app login. 

Open banking came about in a bid to increase competition among banking providers, primarily because the big four – Barclays, HSBC, Lloyds and Royal Bank of Scotland – were so dominant that they didn’t really have to compete for custom. 

It meant smaller banks, which would often offer better deals, didn’t get a look in. So open banking was seen by regulators as a remedy. Banks must allow your data to be shared if you’ve given permission to do so, giving consumers control over their financial data.

Does everyone have access to open banking?

You’re not automatically opted in-to open banking, but once you’ve given explicit permission for the bank or other finance app to access your account details, you’ll see all your accounts for both personal and business data that you want included together. 

It means you no longer need to login to different apps or accounts to see exactly what’s going on, giving you more control over your money. As it includes e-money accounts and credit card data too, you can see exactly what’s going on with your finances at any time.

You don’t specifically have to use a banking app or service – there are other regulated providers with apps that’ll give you the option of allowing them access to your data through open banking, but it must be done online as it isn’t available offline.

What’s so good about open banking?

The biggest benefit of having all this data in one place is how much easier it is for you to budget, shop around for the best deals and to make payments quickly and easily from your bank or building society. 

When you can see exactly what’s going on with your finances at a glance, you know where needs most attention.

Business accounts can do the same, so small businesses can access better products. Also, accounting packages can auto-populate the information needed for your business bookkeeping, making processes more streamlined.

However, you need to make sure that any company you’re allowing access to your banking and credit data is authorised to do so. Take a look at the full list of regulated providers.

If you no longer want an app or website to have access to your data, you can either tell the app provider that you revoke your permission for them to do so, and/or you can tell your bank that you no longer want that particular firm to have access.

At all times you’re in complete control of who can do what under open banking and if you use it well, it should help you to save time and money, and keep a closer eye on your finances.