Are You Ready for Open Banking?

The new EU wide Open Banking rules come in to force this week. The rules will enable participating customers to give third parties access to their personal financial data, potentially opening up a new realm of services based on the data they provide.

The third party providers could provide access to more competitive deals on everything from overdrafts to broadband.

Public perception of the new directive is split between early adopters, who assert that it will increase consumer choice and some consumer groups who fear that customer data security could be compromised.

The new regime could make a significant difference to the banking landscape as currently, only 3% of customers had reported that they had switched accounts according to the Competition and Markets Authority.

Despite the monumental nature of the change in banking that is now upon us, very few members of the public are aware of it, with 92% of people unaware of the initiative according to the consumer group Which?.

Currently, data that tracks how you spend your money is owned by your bank. The open banking directive will mean that ownership of this data is transferred directly to customers.

EU rules specify that banks must share this information with third party providers if a customer gives their permission for the bank to do so.

One example is that of banking overdrafts. According to Victor Troukoudes, the chief executive of Plum:

“The overdraft does not have to live within the current account. It could be from another provider and throw money in your bank account when it hits a low limit and, effectively, will replace the overdraft from the bank.”

This is just one example and the beginning of what could be a massive shake up of the banking industry.

There could be big changes in banking in the next few years, but having a sound understanding of your current financial situation and putting a plan in place for your future will always be important. Contact Westminster Wealth Management today.