You don’t know me, I haven’t gained your trust and I’m new to the scene, but if I asked you to give me access to your bank’s login details in the promise that I could help you with your day to day finances and maybe get you the best deals on loans and credit cards, would you?
As at 13, January 2018, this is essentially what tech companies will be asking you and the reason for this is, Open Banking.
What is Open Banking?
Open Banking, allows you to now give permission to your bank to pass on information about your bank account to third parties authorised by the Financial Conduct Authority.
These third parties should in theory enable you to see whether you can save money on your bills or find you the best deal on your mortgage.
If you want a more detailed explanation, you can visit the Open Banking Website
Why would you want to?
If you have a number of bank accounts, you will no doubt have to log into each one of these individually to see where your money is going. These third party apps would allow you to aggregate all the information into one place.
Help with budgeting and saving
You might already have an app that tracks your spending, these apps does this for you automatically, therefore you can see what and where you are spending.
Offers suited to your circumstances
Depending on the company that you have given access to, they might be able to tailor certain offers to you based on real information. If you are looking for a mortgage, for instance, a company might be able to determine your affordability and show you the best offers available.
What are the banks saying?
Open Banking was designed with competition in mind, so the banks, while publicly embracing it, behind closed doors are probably concerned about its implications to their profits.
It’s no secret that banks enjoy the benefit from the fact that not many of us switch banks. Open banking is supposed to change this. As as it becomes more mainstream, switching could be done at the click of a button on your phone.
I’m only speaking from my experience here, but I don’t recall seeing anything from my bank leading up to 13, January giving me information about Open Banking and doing a quick search online, doesn’t always bring up information about what the banks have to say about Open Banking, so I have included some links below from some of the banks.
Can you opt out of open banking?
You don’t actually have to.
You are in control as to who is given your information by the banks. A third party can’t just ask for the information from your bank in the hope that it can try and sell you its service.
What about those that are at risk?
I’ve got to say that I haven’t been impressed with the Open Banking roll out.
I appreciate that we have to take accountability for who we give our information to, but what about those that might be at risk with this new legislation.
Unfortunately their are many out there without any moral compass and would do all that they could to extract the money out of our most vulnerable, and without information what is it going to mean for this section of our community.
I can only imagine it won’t be long until we see a news article describing how scammers have obtained a vulnerable persons bank details under the guise of Open Banking.
I know that banks have their responsibility, but what about those responsible for the Open Banking Project, have they just implemented something that they can deny their own accountability when things go wrong?
Third Party Apps available
Apps to help you manage your accounts are nothing new.
If you have multiple accounts or don’t know where your money is going, then there are some clear advantages to using one of these apps.
What’s in it for them?
These apps are free to download so on the face of it, you could be mistaken into thinking that they are doing it for the sake of the everyday consumer, but lets not forget that they are in it to make money.
Their business model are comparable to be that of comparison engines in that they partner up with other organisations and will make a commission on any product purchased through one of these apps.
With this in mind, you might ask what’s the point. Advice that we are given tells us that when we look to get a better deal on our mortgage we should try and find a broker that is all of market, or if we are using a comparison website that we should check a few, all this advice is logical, at least by doing this you know you are truly getting the best deal for you and not just being offered the best deal from one of their partners.
It seems that we would need to have a number of these apps installed on our phones just to make sure that we are getting the best deal suited to our circumstances.
Below are two apps that I have tried.
Yolt is owned by ING and is the app that I have on my phone, and I have to say, it’s okay.
It seems to take an age for it to sync with my accounts and I only have two bank accounts, though admittedly have a number of products with these two banks. Whether that is something to do with the fact that I log off every time, I don’t know.
I like the fact that you are able to check your bills and subscriptions and set and track budgets and by entering a pay day it gives you a graphic about what you have left to spend until next pay day, though I think that this is only an estimate.
I tried Money Dashboard, but couldn’t get on with it. The graphical interface wasn’t that nice, and I don’t know whether it was just me but I couldn’t find anywhere to input my payday on the app.
Unlike Yolt, the one advantage it did have was the ability to sign in to your account via its website, though looking through it I didn’t see it offering anymore information than the app itself.
Room for improvement
I accept that people will want their app to do different things and one app can’t necessarily be a catch all for everyone, but it seems that they don’t necessarily have to reinvent the wheel. Apps that I have used for years allow me to input my payday and give me reports on how much I’d spent at particular shops or categories within that period.
You might have a different view and prefer the no nonsense approach that Money Dashboard adopts over Yolt.
At this moment, I think I’ll probably continue to use my money saving app and use Yolt as a easy access reconciliation tool.
Other services that you might want to check out include:
Is Open Banking here to stay?
It’s too early to say.
These apps have a lot to do to make sure that they build the trust of the public, saying that they have banking levels of encryption isn’t going to be enough for some, banks aren’t held in high regard, whether it be the issue about PPI or that they were given huge bailouts whilst still giving themselves substantial bonuses.
If no one is prepared to allow these third party apps their banking credentials, regardless of them being registered with the FCA, how long will they be able to continue operating and if that is the case, will they have to change their business model to make sure that they do make a profit and what will this mean for our information?
What do you think of Open Banking?
Do you have every confidence that it will shake up banking forever or is it something that will be thought of as an experiment gone wrong?