What is Open Banking? 🌐
You want your money to be safe. That's a given. So the concept of an 'open' bank may seem a strange one. But we're currently witnessing the biggest shake-up in the world of modern banking, and it may surprise you to hear that it centres around just this. We're talking about 'Open Banking', and if you're reading this then we think you're going to like what it means for you!
Firstly, let's clarify—it doesn't mean your money is no longer safely stored in the bank vault! 🔐 Whilst they won't be throwing open the doors to the safety deposit boxes, banks are now obligated to let you share your account details with organisations that you choose. Put simply, it's a technology designed for the modern 'mobile world', that provides a more secure and convenient way for you to allow access to your financial information.
With the rise of modern 'neobanks' (e.g. Monzo), we've seen that there's an alternative to the stuffy and old-fashioned world of traditional banking. Open Banking will create even greater innovation, because the use of open-source technology means that third parties can compete on a level field with high-street banks—which ultimately means more choice for you! Here at Plum, we think that the better and more diverse options for those wanting to understand spending habits or take control of their finances has got to be a positive thing. 💜
Still sounds a bit scary. Isn't this a hacker's dream?!
Whilst it's true that Open Banking means you can share account access with whoever you so wish, it should also help keep the bandidos at bay 👮♀️ because it allows third-party financial apps to utilise biometric security features built-in to modern smartphones. This makes things more convenient for you too, because there's less reliance on lengthy passwords that you need to remember! Authorised providers will be granted read-only access to data related to the specific service you've signed-up for, and all the normal data protection rules still apply.
Crucially, Open Banking rules mean that in allowing you to share your account details with authorised providers, banks must not hold you liable for fraud (something they previously threatened in order to try and maintain their monopoly over your details). So long as you aren't deemed to have been 'grossly negligent', then it's your banks responsibility to rectify any instances of fraud—or investigate with any third parties you've authorised, if the bank suspects that they are at fault.
For many, the concept of allowing a third-party to access your bank account may still seem a little unsettling. But it's important to remember that these providers can't make changes to your account, or move money etc., unless you've granted them specific permission to do so. Also, the fact that this technology will soon underpin all major UK financial institutions means that vast amounts of effort has already gone into eradicating any potential risks, ahead of the system going live.
Overall, we feel that greater transparency and the anticipated upsurge in the likes of e.g. price comparison or financial assistance tools (yep, like Plum!) that use new Open Banking technology will far outweigh any potential concerns. This technology paves the way for more of you to master your finances, and that always gets our Plums up! 👍