In 2016, The Competition and Markets Authority (CMA) retail banking market investigation concluded that older and larger banks do not have to compete hard enough for customers’ business, and smaller and newer banks find it difficult to grow and access the market. This means that many people are paying more than they should for their banking activities and are not benefiting from new services.
To tackle these problems, the CMA is implementing a wide-reaching package of reforms. One of the remedies is Open Banking. Open Banking enables personal customers and small businesses to share their data securely with other banks and with third parties, allowing them to compare products on the basis of their own requirements and to manage their accounts using regulated third parties to provide new and innovative payment services.
We exist to deliver Open Banking. We were created to work with the eight Banks and one Building Society mandated by the CMA (Allied Irish Bank, Bank of Ireland, Barclays, Danske, HSBC, Lloyds Banking Group, Nationwide, RBS Group and Santander), as well as Challenger Banks, FinTechs, Third Parties, Consumer Groups and other parties to define and develop the required Application Programme Interfaces (APIs), security and messaging standards that underpin Open Banking.
When are the benefits being rolled out?
The first delivery of Open Banking (“Open Data”) was released in March 2017, making product, branch and ATM data from the nine institutions available.
This was followed in July 2017 with Read / Write specifications which will regulate companies to enable them, with the customer’s express permission, to access accounts and send payments.
The nine institutions are required to have shared their data (in accordance with our standards and specifications) by 13 January 2018.
The January 2018 delivery is aligned to upcoming European Regulation (Payment Services Directive 2), where authorised third parties can be given consent by the account holder to access their Bank accounts to extract data and / or initiate payments, without having to use the Banks Online services. It is envisaged that this capability will then lead to far reaching innovative services being created by new entrants and technology companies.
Trust and Transparency
Open Banking builds APIs and standards on a ‘security first’ basis and puts the trust of the customer at the heart of its planning and production. This extends to creating, alongside UK regulators, security mechanisms and governance structures for regulated third parties accessing and using a customer’s accounts.
The other CMA remedies will require the banks to publish trustworthy and objective information on quality of service, so that customers can see how their own bank has performed in comparison to other banks and to send out suitable periodic and event-based ‘prompts’. Examples of these include the closure of a local branch or an increase in charges, to remind their customers to review whether they are getting the best value and to switch banks if not.
How does Open Banking work?
Open Banking will enable companies to give more accurate personal financial guidance, tailored to your particular circumstances and delivered securely and confidentially.
To provide tailored advice, companies need to know how you use your account. At the moment, to get personal financial guidance, you have to hand over your confidential banking information to price comparison websites.
Open Banking will use APIs (Application Programming Interfaces) to share customer information securely.
Companies will be able to use open banking APIs to see your transaction information to tell you what you might save when considering the current account best suited to you. Or if you run a small business you could find the best deals for your business accounts and loans.