Open Banking is an important step for customers of Financial Services, as it was designed to allow for more innovation and competition, especially outside of traditional banking. That means the way we bank and manage our money can be reshaped into something we have more understanding of and autonomy over.
Open Banking is a secure, regulated system by which banks have to let you share your financial data with third-party financial service providers that you give permission to.
It allows you to get a better overview of your financial situation by utilising apps that can help to monitor your spending, manage your regular payments, automate your saving, or understand your borrowing better.
It means smaller and newer banks and service providers can enter the market with new ways of delivering services to consumers and that larger, traditional banks will have to become more competitive. It will also mean greater access to banking for people who maybe struggled before, for example, screen reading apps for people who are partially sighted have often been difficult to use with online banking but the invention of new apps that utilise Open Banking are improving this greatly. All of which should result in lower costs, competitive rates and better customer service.
How does open banking work?
Open banking works by using something called APIs (Application Programming Interfaces). They sound a bit complicated but they are actually the same technology that’s already in use by apps such as Facebook, Instagram and Google Maps.
In basic terms, an API is a facility where multiple applications can interact with and get data from one another. So, in terms of banking, if you’re using a budgeting app and it wants to get data from your personal bank account, it’ll use an API to talk to your bank and ask for data such as your current balance, recent transactions and any direct debits you may have scheduled to come out.
With most apps that use Open Banking to populate your data, you will be asked to select your banking provider from a list and once you have clicked it, you will be redirected to your banking app or web page and asked if you want to grant permission to this app to access your data. You will then follow your bank’s usual security procedures to approve this connection.
It’s important to note that you don’t have to use Open Banking or share your data if you don’t want to, you can revoke access or withdraw permission to your accounts at any time. You also need to reconfirm use of Open Banking periodically, which is to make sure you’re regularly up to date with all of the ways in which you share your data.
How can it help with your borrowing?
Opening banking can help to give you a clearer overview of your borrowing by having your accounts and balances all shown in one place. It can also help you to find the best deals on the products and services that matter to you based on what you can afford.
Let’s take a look at it from the perspective of how the ilumoni app can help you to borrow well.
When you sign up to the ilumoni app, we will ask your permission to connect to your current accounts and borrowing accounts - ilumoni then looks at your spending, costs of borrowing and credit score, alongside the products you are eligible for based on your credit report, to suggest repayment amounts and habits and highlight different providers and better products. The suggestions given are all based on what you want to achieve, such as paying off sooner or freeing up cash for other things, meaning you end up with more money and more freedom.
Is Open Banking available with mobile and online banking?
Yes, Open Banking will only work if you use online or mobile banking as you need access to the digital form of your account for the APIs to be able to work.
If you don't currently have online banking with your bank, you should be able to contact them and they'll help you get set up so that you can take advantage of more services. In a very small number of cases,
Is Open Banking safe?
The Open Banking systems and protocols are all operated in the same way as online banking with your bank, having been designed specifically to keep your information just as safe while giving you access to more providers to help you with your finances.
As with anything related to your personal data, you need to be careful with whom you share it. You should only share your data with an authorised company/third party that is regulated by the Financial Conduct Authority (FCA).
These companies have to apply to be regulated by the FCA and have to adhere to strict guidelines regarding how they can process your data. Those that have been approved will appear on the FCA Register or Open Banking Directory and will also display on their websites/app if they are regulated and give their registration number. You can see ilumoni listed on the Open Banking Directory here.
And as long as the provider you are using is authorised, you are protected from fraud by your bank when sharing data through Open Banking. Only the accounts you share can be accessed and you can change what you share at any time.
Should I use Open Banking?
As with anything finance-based, the decision to use Open Banking is completely up to you.
We think Open Banking is a fantastic tool that is allowing people a lot more insight into their financial situation and flexibility with things like budgeting and borrowing.
Sign up for our app today
1 in 3 of us worry about money every day but here at ilumoni we’re working to help relieve the stress that comes with money worries by helping people to borrow well.
Download the ilumoni app today and let us help you to take control of your borrowing by finding you smart ways to repay and highlighting better deals that could save you money.