An Introduction to Open Banking

An Introduction to Open Banking

Open Banking came into effect on January 13, 2018. In this short blog we look at what Open Banking is, who it is for, and why it is important.

What is Open Banking?

Open Banking is a new, secure way for customers to take control of their financial data and to share it with other organisations including other banks.

It is the retail banking industry’s response to the UK Government’s request for fairer, more transparent banking and financial services, and follows the Competition and Markets Authority (CMA) investigation into the supply of personal current accounts (PCA’s) and of banking services to small and medium-sized enterprises (SMEs).

Why was the business created?

Open Banking was created to enable innovation, transparency and competition in UK financial services, by making it easy and safe for individuals and SMEs to share the financial information held by their banks with third parties.

A number of additional drivers were evident including the aim of spurring innovation, and competition in financial services. Inertia and switching costs are powerful elements of most banking relationships and as a result many of us do not ‘shop around’ or switch banks. By facilitating a data share via APIs it is believed that new innovative providers will enter the market with compelling propositions.

What are the key benefits?

The key benefits largely relate to the creation of a more attractive ecosystem for innovators, while also allowing customers to better understand their financial positions and their options. Many of us are multi-banked and lack a dashboard view of our accounts meaning that in some instances we may have too much savings in low interest accounts while simultaneously paying over the odds on an overdraft facility with a competitive institution. It is hoped that better API access can allow the likes of dashboard applications become more commonplace, empowering customers to make better decisions as to their finances.

How does it work?

There are two primary methods being used – screen scraping and API access. The former essentially allows read only access, while the latter is perceived to be more secure and facilitates deeper access based on access credentials permitted by the account holder.

Is it secure?

Yes it should be. After all it is designed to facilitate access between regulated companies.

What has it to do with NorthRow?

NorthRow delivered a customised solution that provides Open Banking with a complete picture of who they are working with, not just in the UK but now across Europe.  Our robust approach to validation ensures that a thorough check is made using multiple data points to ensure that the process is comprehensive while remaining low touch.

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