High street banks have an incredible amount of personal and transaction data on their customers. But increasing numbers of customers just aren’t happy with what their banks are providing in terms of transparency, value for money, and even product experience (according to a recent Which? report). But banks are big, and understanding and organising the data they have to innovate for customers isn’t easy. Open Banking changes things.
What’s Open Banking?
In 2018, the competition watchdog The Competition and Markets Authority (CMA) brought in a series of reforms to how banks deal with your financial information called Open Banking. It was introduced alongside a similar European regulation called the Payment Services Directive (PSD2).
Basically, Open Banking requires all UK-regulated banks to let you share your financial data such as your spending habits, regular payments and companies you use (basically your bank, credit card or savings statements) securely, with authorised Open Banking providers. The goal of Open Banking rules is to transfer ownership of account information from the banks, to YOU the customer. It puts you in control.
Protecting your data and money
A fundamental part of these regulations is that you do not have to share your data with any third-party provider. But banks have to allow your info to be shared, but ONLY if you expressly give permission to a new provider.
It’s generally pretty clear when you’re about to connect your account through a regulated Open Banking process. Each provider asks for your consent to access account(s) when you sign up to it. It then sends a request to your bank, which processess it and securely shares your transaction details.
Ok great, but what’s in it for me?
These changes are intended to bring more competition and innovation to financial services, ideally resulting in lower costs, better customer service, and more innovative products to help manage your money (like Trezeo 😉).
We are quite excited about Open Banking making it easier for self-employed people to access affordable credit. You see, instead of requiring each customer to send us previous bank statements and pay slips from the last 12 months to help us assess their credit – which is what most banks would do – we can just capture that information directly with Open Banking access. This means that we can make a decision in minutes, not weeks. And it is based on your unique circumstances.
How does it work? Is it safe?
To provide these new, super-useful services, authorised companies like Trezeo need access to your transaction data. But banks have been telling you to protect your banking details for YEARS, so it’s a bit daunting, and can feel scary, to now share this data with new businesses. It’s regulated, which means that safeguards are in place to make sure you are in control of what you share and that it’s safe for you to do so.
With Open Banking, transaction information is shared with third party companies through APIs. To use bank APIs, companies have to be authorised by the Financial Conduct Authority (FCA) as Account Information Service Providers (AISPs). To do that, they need to comply with regulations by keeping your account information safe and secure, and they can only use their access to provide the service that you’ve asked for.
Without these APIs, you have to actually third-party providers your login details. These new APIs allow you to share the data in your bank account safely and securely – and quickly – without having to hand over your password.
If they work as intended, these rules help challengers, like Trezeo, actually develop new products that are more useful, give customers greater choice, and encourage the big banks to do better.
When you sign up to Trezeo you are asked to connect your regular bank account with your Trezeo account via our authorised third-party provider TrueLayer.
This lets us:
1. Assess you for credit more efficiently
2. Secure your account against fraudsters
3. Identify your income and provide pay forecasts
Learn more about Open Banking here and feel free to learn more about our regulatory permissions here. And, as always, please let us know if you’d like to chat through what we’re doing to build the financial safety net for the self-employed.