In the modern age, consumers are always looking for ways not just to save some extra cash but also to get the most out of the many budgeting apps, price comparison sites and more which have sprung up in recent years. But some people have found this surprisingly hard to achieve – and that’s where Open Banking comes into play.
This post will explore just what Open Banking is, and will point out some important dates for finance leaders to be aware of as they start to implement these reforms.
What exactly is Open Banking?
Put simply, Open Banking is a project designed by the Competition and Markets Authority to reform the rules around personal data in finance. Under Open Banking, it’s going to become easier for a person who uses financial services – such as a bank customer, or a holder of an investment portfolio – to use the data they accumulate as part of being a node in the financial system. This could in theory be anything from what they spend their cash on to their preferred energy providers.
Open Banking means that, as long as the consumer gives their consent, a bank has to allow that customer to take all of this information and give it to a third party. A consumer might want to do this if they want to use a budgeting app, for example, or maybe they’ll give it to a price comparison website which will look to see if they’re spending their money well. A corporation, meanwhile, might want to integrate their financial data with a software package for analysis of revenue streams.
What are the key dates?
It’s already possible for customers of some institutions to do this. In many ways, the ultimate key date is in the past: it arrived, along with the second Payment Services Directive (or PSD2), in January of last year. But there are still some key dates to be aware of if you’re a finance leader keen to make the most of Open Banking.
The original deadline for financial institutions had to state that they were ready for external testing in advance of PSD2 was 14th March, so it’s now the case that organisations have to be ready to participate. More broadly, 2019 is likely to become the year in which more and more organisations enrol. While at the moment consumer organisations like Monzo are leading the charge, that could well evolve.
Open banking holds the potential to change everything for financial institutions, and whether you’re on the side of the financial institution obliged to make the change or a user of the services which benefit from Open Banking, 2019 will be a key year.
Integrating your financial data with software to extract insights on everything from staff performance to the likelihood of new revenue streams is a great idea – and Open Banking can help you do it.