Open Banking has had a huge impact on the financial world since its launch in 2018. It has effectively changed the way that financial information can be viewed and shared, putting customers in complete control of their personal data. But why is Open Banking so valuable? How can individuals benefit from it? Let’s take a look.
Open Banking explained
Established in 2018, the Open Banking initiative requires banks to create open interfaces to previously closed customer accounts. The primary objective of the initiative is to ensure that sharing, retrieving, and presenting financial information is easier for customers and service providers. Open Banking has enabled customers to access, view, and consolidate accounts using a Third Party Provider (TPP) that has been authorised and is regulated by the FCA.
So long as you opt-in to the initiative, banks are now required by law to share your financial data through Application Programming Interfaces (APIs), which might help you access better financial deals and services. The bottom line is that Open Banking has been designed to provide you with a broader range of financial options, which hopefully save you money in numerous ways.
How does Open Banking benefit customers?
Perhaps the most significant aspect of Open Banking is that customers can now consolidate all of their accounts into one place. Every bank that is regulated in the United Kingdom must participate in Open Banking, which has made it much easier for people to access better deals and services.
While it’s a new concept that some people struggle to understand at first, Open Banking is 100% safe. It is regulated by the Financial Conduct Authority (FCA), and all third parties that participate are held to strict accountability measures. Although banks are legally required to be involved in Open Banking, individual customers are within their rights to opt-out if they don’t want to share their data with third parties. This is why it’s such a valuable initiative, as it puts customers in total control of how their data is accessed, shared, and managed.
What’s more, for anyone borrowing money, Open Banking can help you access better rates and a broader spectrum of deals. Historically, lenders have relied exclusively on your credit score when considering your application, which is a measure of your creditworthiness provided by a third party. But thanks to Open Banking, lenders like Koyo Loans are able to assess your real-life financial data when considering your application, enabling them to make their decision based on your current finances.
So, why is Open Banking such a big deal?
Open Banking has received so much hype because it has transformed the way that financial information is shared and accessed. It provides individual customers with total control over their data and brings a broader range of services and offers into play. While it’s completely optional for customers, opting in to Open Banking is likely to improve your financial management and help you access better deals and services.
So, whether you’re applying for a personal loan or looking for a new credit card, Open Banking can help you access a great deal. Equally, if you change your mind at any time and no longer want your data to be shared, you can simply opt-out by contacting your bank and proceed as you did before.