Open Banking is still, relatively speaking, in its infancy. But it’s already transforming how banks work with their customers - and how customers interact with financial institutions and the retail industry (which is why we subscribe to it).
If you’re not familiar with the term Open Banking, that’s understandable. We think it's good news for the economy - providing people with an efficient, fast, and trustworthy way to get access to more suitable products.
Here is everything you need to know in a nutshell. If you have any questions, why not drop us a line. We’d love to help.
What is Open Banking?
Open Banking is a reform act that changes how banks handle financial information. It was introduced in January 2018, its aim being to introduce competition and innovation into a stale industry - leading to products designed to help people better manage their money.
What does this mean to you as a customer? Banks in the UK must now consent to sharing some of your financial data with authorised providers. These could be competing banks, online apps, or other relevant UK-based organisations.
Examples of Open Banking
So, in practical terms, how will this benefit you? Well, you could elect to share your financial data with an app on your Smartphone - or even one of your existing bank’s competitors.
Streamlined mortgage Applications
It could make applying for a mortgage easier. By sharing your information with a proposed provider, you could shorten the administration process - saving you a great deal of time.
Your mortgage provider would be able to make a faster and better-informed decision - and recommend products based on factors like your income and monthly expenditure.
Find better deals on comparison sites
If you want to get a better deal, your first port of call is probably a price comparison site. Open Banking makes using sites like these easier. Instead of wading through hundreds of options to find the right deal, your transactional data could provide you with tailored (and more suitable) choices.
For example, your financial data could limit the number of results retrieved - or make recommendations based on your financial situation and, therefore, your capacity to pay back what you borrow.
Reduce your monthly outgoings
We’re creatures of habit, let’s be honest. That means we buy the same things month-on-month. Why not use Open Banking to share your spending habits with online retailers, who will then tailor deals based on your spending behaviour - saving you money, and maybe turning you into a loyal customer.
This new technology could:
Give the economy a boost - retailers will sell more by offering deals their customers want
Save you money and time - as you won’t have to shop around and compare as much
What are the benefits of Open Banking?
As is becoming clear, it’s a good idea - not just for customers, but other industry providers and the economy as a whole.
Enable banks to collaborate with key industry players. This could give them a foot-in-the-door with potential partners - who may give them exclusive rights to certain products (which could translate into better deals for end-consumers).
It’s also true to say that this is a two-way street. Your bank might not like sharing your data with a competitor - but they will also receive data from some of their industry rivals, which they can use to win new business or refine their practices.
More choice for customers will, in the longer-term, make the industry more competitive - forcing banks to innovate to stand out from the crowd and win more business. The concomitant effect of this will be better offerings that deliver improved value to the market.
How do I know open banking is the safer option?
You have to consent to it
It’s important to point out that Open Banking isn’t mandatory. This isn’t a non-negotiable directive that’ll be rolled out UK-wide whether you like it or not. Your bank can only share your financial data if you’ve given consent for them to do so. And, even if you do give permission, you can withdraw it at any time.
Open Banking is regulated
Companies that offer this service have to be regulated. This means they have to abide by a code of conduct laid down by the Financial Conduct Authority (FCA). Therefore, you can review a third-party provider before allowing your bank to share your financial data with them.
Additional protection is provided via the:
Financial Ombudsman Service, who can mitigate in the event of a complaint or dispute.
The Financial Services Compensation Scheme, if your third-party provider goes bust.
Why Salad Money Uses Open Banking
We would never use a process unless we felt it to be (a) safe, and (b) beneficial to our customers. It’s also important to point out that most of the top UK providers now use Open Banking - and wouldn’t do so unless they fully trusted it.
Customers who use online banking will be able to share their account with our AI system. The technology we use will safeguard your financial data - giving the peace of mind you deserve. At the same time, Open Banking will allow us to check if you can afford your loan - protecting us both.
You have control
We want you to feel secure when using our Open Banking service. That’s why, in line with other loan providers, we’ll give you total control over when, how, and with whom your financial data is shared. Changed your mind? No problem. Just let us know and we’ll withdraw your request.
Ready to find out more?
The Salad Money team is here to help. We specialise in helping key workers get short-term loans of up to £1000, which they might struggle to get elsewhere without paying through the nose.
Why not apply now? it only takes a couple of minutes and could make a real difference to your financial situation. Got a question or not sure where to start? Our website is packed with guidance and you can speak to a member of our team via the live chat function.