Open Banking is a scheme which means that all banks in the UK now allow you to share your financial data with other banks or start-up firms, provided they're authorised. This includes your bank statements, savings, credit card accounts and debts like your mortgage.
The CMA hopes Open Banking will encourage account switching and drive down costs, boost competition and encourage better deals.
Its own research showed that just 3% of people switch current accounts in a year.1
The benefits of Open Banking
There are lots of benefits of Open Banking. It’s all about driving competition and better deals for consumers and it has the potential to revolutionise how you manage your money.
Banks and any app registered with the Financial Conduct Authority (FCA) can make use of bank data so they can analyse how you spend to tailor products to your needs. For example, you could use an app that will analyse your spending and recommend a new product like a credit card or savings account to save you money, or sign up to a provider which displays all of your accounts with multiple banks in one place so you have a better overview of your finances.
Another app might use the information to tell you where to make savings by reducing your overdraft charges on your current account, save you money on bills, credit card interest or loan repayments.
An app might help you avoid charges or boost your savings by automatically moving money between various accounts.
Open Banking could also spur action in other markets, by encouraging you to look at your energy or phone bills.
It can even help with lending decisions by allowing a lender to see your income and all your outgoings. This gives them the opportunity to offer you a rate on your borrowing that reflects your actual profile, which might be more competitive than you would be offered from your bank.
Another important benefit is consumer protection. While account holders have been able to let third-party providers such as budgeting apps access bank account data for some time, since 13 January 2018, when Open Banking came into force, your money is protected – as long as the Open Banking provider is authorised with the FCA.