Tagopen banking

Open Banking – Security & Privacy

Open Banking has the potential to deliver huge benefits for the consumer. However, from the press coverage so far this week, customers still have concerns about how their data is handled.

The idea that banks will open their precious data streams, using a standardised set of API’s has the opportunity to deliver big gains.  From new services to improved customer experience, the increased transparency will open up options that could revolutionise the way we bank.

The Open Banking changes made last week are only the beginning, over  the next two years credit cards, savings accounts and more will be added, opening up a world of opportunity for providers and customers alike.

With this new technology comes uncertainty that banks will need to help customers overcome if they are to build trust in new services.

What’s an API?

Open Banking is delivered through the implementation of API’s (Application Programming Interfaces) – which are an intelligent connection between systems that allow for a flow of data.

API’s are not new. They’ve been around for many years and allow us to connect our desktop and mobile banking applications to our accounts, facilitating the secure and private transfer of transactions to where we need them to be.

What Open Banking has done, is standardise the presentation of these API’s so that  (when we allow them to) bank systems can talk to other systems.

So, is my account now open for everyone to see?

Banks traditionally have been responsible for making sure your account stays secure and private, and fundamentally nothing has changed here.   In fact, it’s largely within the banks’ interest to keep that data to themselves, that’s why it has traditionally been tricky to change bank accounts.

Under Open Banking, whilst the method of moving data is standardised this DOES NOT mean there is a free-for-all with information.  Any institutions that require access to your data to deliver a service, will still require YOUR permission for that to happen.

The rules are fairly clear:

  • Any new bank or payment provider that uses Open Banking will be regulated by the financial services regulator in their country of origin,/

Financial Conduct Authority - Open Banking

  • Customers in the UK will be able to find out if organisations are regulated on the FCA website, so any provider of Open Banking services will need to be enrolled with the FCA and have that logo displayed on their site.
  • Open Banking providers are not permitted to take any action on any account with the explicit consent of the account holder.

You can search the Financial Conduct Authority register here. I did a quick search for the app-based Monzo bank that I use, and this is what the register displays:

FCA Register - Monzo - Open Banking

So, its clear from my search that Monzo is authorised – ‘a firm that is given permission to provide regulated products and services’.

However, because I Monzo never connects to my main bank account, I’ve never had to explicitly give permission. If I wanted that to happen (for instance, if Monza introduced a service to display my Santander balance or transactions and I wanted to use that), I would need to explicitly give permission. At that point, I’d recheck that both providers were FCA registered. 

So, Open Banking is safe?

As with any online service, some basic common sense is recommended to ensure your security and privacy, here are some simple rules to remember:

  1. Never give out your online banking password or access codes over the phone or in an email. No bank will ever ask you for a password or PIN number.
  2. Keep your anti-virus and malware software up to date.
  3. Avoid shared computers and networks for online banking.
  4. Protect your password and make them strong.
  5. Know what you are downloading – if it’s a new app that claims to help you save money with your bank account – check on the FCA website and be satisfied that the provider is authorised.

Overall, Open Banking presents no further risks than online banking did until now.

If you don’t give permission, then your banking data stays as secure as it was before the legislation was introduced.   You might miss out on some of the benefits, but you should stay safe in the knowledge that your information is secure.



Open Banking : Whats in it for customers?

The way that we bank will change radically this weekend, but few consumers in the UK understand the impact of Open Banking, and how it will transform their personal finances.

From today (13th Jan),  banks will be able (with permission) to open up their archives of spending data to licensed financial services providers.  From technology providers to retailers, a whole new set of data will provide information on how & where we spend our money.

The new rules aim to bring more competition into the banking marketplace, and we have already seen the emergence of new players who are radically changing how we bank.

But what is really in Open Banking for us?

At the very least, customers should expect easier access to their information.  Using one banking app to see information from accounts at multiple banks is one opportunity, assuming you’ve opted in to share that data.

Yolt - Open BankingI expect to see a raft of apps that will tap into that freedom of information, like Yolt, Plum and Bean – these platforms will allow you to aggregate your balances from multiple accounts (Current, Savings and Credit Cards) into one screen.

The promise is that these apps will help you save money, with providers using the data you share to offer you the best services and the lowest cost.

In the last few years, we have seen new banks emerging, ready to tackle the technology and societal needs of customers more seriously.  These new providers have been agile enough to steal a march, particularly with younger customers.

Monzo Logo - Open BankingA new breed of banks that run as apps on your phone e.g. Monzo, Revolut and Starling,  offer new features in packages that suit a mobile-first world.   These modern banks will be the first to offer revolutionary services in the banking field.  For example, Revolut already offers the ability to buy and sell Cryptocurrencies directly from the app, next to a current account.

These new providers will be different to traditional banks, offering advice and guidance on the most suitable products, and we should expect to see technology take a lead here with machine learning and AI providing new insights and methods for managing money.

Financial Services Authority - Open BankingAll of these apps will need to be licensed by the Financial Services Authority, meaning that consumers can feel safe knowing that their data is handled appropriately.

Open Banking should also allow for easier switching of accounts, meaning consumers can hunt around for the best deals without the challenges of moving an account from one provider to another.

Open Banking improves Customer Experience

Ultimately, the consumer stands to gain from Open Banking.  The build of new apps and services will open up new choices for customers.  Increased transparency and competition will create a new standard for customer experience.

Provided consumers exercise some due diligence in ensuring that services are covered by the FSA, then there is only upside.

© 2018 Matt Rutherford

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