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What is open banking?

Holly Thomas / 16 January 2018 ( 16 May 2022 )

Find out what open banking is, and how it could help you save money.

Clear glass piggy bank with coins visible inside
Open banking aims to make managing your money clearer and easier - giving you more choice, better services and cheaper products.

What is open banking?

Put simply, open banking allows companies to access current accounts from the UK's biggest banks to gather information about how people can improve how they run their finances.

Banks and other registered financial services companies – known as Third Party Providers (TPP) –  are able to offer tailored money-saving services. It has been in place since January 2018, and there are now over 5 million users of open banking services in the UK.

What are the benefits of open banking?

By analysing people’s transactional behaviour, they could help recommend a different bank account that might save them money in bank charges or gain them more interest by finding an account with more generous terms.

A TPP app might also use the information to find credit at a competitive rate, real-time updates on spending and cash withdrawals. Or even find credit when it has been refused elsewhere.

An app might also help manage money better. For example, it might help consumers avoid bank charges or boost savings by automatically moving money between accounts. It can also alert you to regular payments such as subscriptions.

What apps use open banking?

Some of the most popular apps include personal finance apps such as Mint, Yolt and SPiir.

Is open banking safe?

With financial fraud now the most common crime in the UK, security and fraud is a huge concern.

Crucially, open banking is something that you have to opt into. So if you do nothing, nothing will change. However, for those who do wish to engage, there are security issues to bear in mind.

Fraudsters will be poised to find ways of using open banking to steal information  – and money. Copycat websites pretending to be TPPs could start emerging and some conmen might set up as fake TPPs outside the UK that will therefore fall outside regulations from the City watchdog, the Financial Conduct Authority (FCA). It’s important to be on your guard.

Protecting customers

The FCA has put strict rules in place to protect consumers who use open banking. All TPPs have to be approved by the regulator before they can appear on the Open Banking Directory.

Open banking does not mean handing over passwords. Software called APIs (Application Programming Interfaces) will be used to share customer information securely. It doesn’t allow direct access to a bank account, it simply consents to banks releasing certain information.

Each bank will offer a section on online banking called the Consent Store. It will name all companies that have consent to access account details, with an option to remove a firm. Consumers can check the Financial Services Register to see if a TPP is regulated.

Crucially, banks are still liable for a refund should a customer fall victim to fraud (unless there has been negligence). If the third party was at fault, the bank can recover the funds from them.

Protect yourself from fraud

If you're interested in services offered by open banking, remain vigilant against potential fraudsters:

Listen to your instincts – if something feels wrong, then it's usually right to pause and question it.

Stay in control – have the confidence to refuse unusual requests for information.

Keep passwords to yourself – your bank or the police will never call you to ask for you full online banking password. Equally, nor will any utility companies or internet providers. The only person who should have knowledge of your passwords is you.

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The opinions expressed are those of the author and are not held by Saga unless specifically stated. The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.

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