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December 20th 2018

Open banking explained

Reforms instigated by the Competition and Markets Authority, alongside a new regulation known as “the second Payment Services Directive” which came into force on 13 January 2018, require UK regulated banks to share your financial data (including things like your spending habits, and the companies you use) with authorised providers offering budgeting apps, and other banks – but only if you give permission.

The idea of open banking is to stimulate more competition and innovation in the financial services arena. It paves the way for you to access apps that can help you better monitor and manage your finances, whilst offering a measure of protection.

It is important to understand that the sharing of data is not mandatory – it remains entirely within the control of each individual and banks are not permitted to share personal financial information with authorised providers under the new regime, except with your express consent. You remain in control of how your data is shared.

The rules apply only to “payment accounts” which can be accessed online – initially only current accounts but also in due course credit cards, prepaid cards and some savings accounts.

Protection is only available in relation to the sharing of data with authorised companies – and not all companies are authorised. Registers of authorised third parties appear at the FCA Financial Services Register and the Open Banking Index.

There are two types of authorisation: account information services, which aggregate all your financial information in one place; and payment initiation services, which let you pay companies directly from your bank, rather than through third parties like Visa or Mastercard.

If you share your financial data with a third party provider who is not (yet) authorised, you will not enjoy the same level of protection against fraud. Always check a provider before you give it access to your accounts.

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