Why Open Banking Changes Things Forever

Open banking has given me much to be happy about this week.

The banks, quite frankly, got spanked.

Years of none existent competition, resulting in shitty rates for consumers, are finally coming to the end.

The Competition and Markets Authority (CMA) has concluded its £5m investigation and is already warming up its foot ready to kick the Britain’s biggest banks arses.

There are to be some major changes to level up the playing field. Here is what you need to know.

Open banking has given me much to be happy about this week. The banks, quite frankly, got spanked. Years of none existent competition, resulting in shitty rates for consumers, are finally coming to the end. The Competition and Markets Authority (CMA) has concluded its £5m investigation and is already warming up its foot ready to kick the Britain's biggest banks arses. There are to be some major changes to level up the playing field. Here is what you need to know.

Things are about to get competitive

The Open Bank standard is one of the CMAs three “cross-cutting measures” which will aim to bring competition between the banks.

The new measures “have the object of increasing customer engagement and making it easier for personal and business customers to compare the prices and service quality of different providers and of encouraging the development of new services”.

Or, in plain English, they want you to be aware of a better deal around the corner.

They also want it to be much easier to switch should you want to take up that better offer.

They’ll do so by shaking up the Current Account Switching Service (CASS), as well as changing the rules around personal current account overdrafts.

So in short, you’ll be able to see if the deal you’re getting is any good and if its not, you’ll be able to switch providers with ease.

The banks are going to have to come up with some tasty products to ensure your loyalty.

A mobile banking revolution is coming

The CMA is going to force Britain’s biggest banks into offering the same services on smartphones as you can find in high street branches.

Now they’ve reached the end of their two year investigation into rip-off bank accounts, they have announced new rules which will enable customers to access details of their entire finances through one single app.

Banks have been told they must give all customers the capability to apply for loans, overdrafts and mortgages on their mobile phones as well as being able to transfer money between accounts.

Their intention, as mentioned above, is to create competition among the banks.

It will allow customers to access all of their finances – including current accounts, saving accounts and mortgages – in one place regardless of whether they are currently managed by different companies.

You will be able to immediately compare your rates with other services on your phone and move your money if you think you’re getting a poor deal – transparency at last!

Bye bye up-selling

My biggest annoyance with the banks in recent years is their dodgy efforts at up-selling us with products we neither wanted, nor needed.

The PPI and packaged banks accounts scandals are enough to prove that.

However, by taking away the need to pop into your high street branch to shop for financial products such as loans and mortgages, you eliminate the risk of face-to-face “advisers” up-selling you with a plethora of poor-value add ons you didn’t need.

A CMA source said the new measures would give people “proper control over bank account and money in general”, adding: “They will also have greater access to loans and shopping around and be able to sit down and say this is my income, this is my outgoings, and these are the products I would like based on own my life and usage”.

The games up guys!

I spoke to local prepaid account provider icount Money, CEO Samuel Mond first set up the account to provide a secure account for people in debt solutions that were being turned away by the high street due to poor credit history.

Samuel had this to say;

With the huge surge in consumers opting for mobile banking in addition to traditional methods of managing money, this is just a small snippet of what the future holds for the banking industry. This is one of the reasons why icount launched a new website, to be mobile friendly! The emergence of banking innovations will potentially see the end of plastic in its entirety… how people will adapt is another question altogether. Anything that assists with money management or assisting with financial capability is welcomed as it is very much needed!

Security concerns

I have to be honest, as ecstatic as I am about the changes in transparency and competition, I do have some concerns when it comes to security.

The CMA will insist that the banks share customers’ financial details with other “approved firms” to create the banking apps which will give us the access to all our financial details from multiple accounts.

Obviously this MUST be strenuously tested before they are rolled out.

There have been too many incidents where personal information has been leaked and major security measures need to be in place to prevent this happening.

But, when there are 11m mobile banking app log ins per day compared with 4.3m per day on desktop computers, it does make sense to bring things up to date.

What are you thoughts on the Open Bank standard?

Thinking Thrifty

Thinking Thrifty

David Jack Taylor is the founder and editor of the Thinking Thrifty blog. An award winning personal finance and lifestyle blogger, he shows how it is possible to live extremely well for less.
Thinking Thrifty
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