Where we stand today the Big Four Banks have more than 70% of the personal current account market and 85% of the business current account market. I’m sure most people would agree that there’s room for some competition in this market. In pretty much every area of life, the more competition there is, the better it is for the consumer.
That’s why the launch of open banking this week is good news for anybody who wants to shop around for their finances, perhaps shave £100 off their mortgage, access better finance deals or secure a financial product more quickly or easily. The market is opening up and banks and lenders are going to be working more creatively to respond to customers’ demands and needs. And there are going to be exciting young “disrupter” and “challenger” companies offering new solutions in the space where previously just the big banks operated.
An Open Market
The banking market is opening up, but its important for consumers to know that their bank accounts aren’t opening up. If you want to continue running your banking the way you have always managed your banking, you can, of course, do exactly that. You do not have to open your bank account and share your transactional data with anybody.
Open banking simply means that anyone with a bank account has the option to agree to share their transactional data with a third party, so that they can access a better or additional service or terms. I’m betting that people who have been used to switching their gas, electricity, broadband and phone suppliers are going to be early adopters of the opportunities afforded by open banking. They are going to be quick to access the new technology which will allow them to tighten up their finances and secure better deals. And they will be quick to catch on to some simple checks that they will need to make before doing business with a third party.
The Influence of the FCA
As the open banking market starts to work, consumers are going to hear a lot about the FCA, the Financial Services Authority and the Financial Services Register it operates. If you are going to authorise a third party to access your bank account’s transactional data, you have to ensure its regulated by the FCA. It’s perfectly simple – all you have to do is look up the Financial Services Register online, and key in the name of the company you are thinking of doing business with. If it’s there, it’s safe and regulated. If it’s not – buyer beware.
It’s a similar process to getting a new gas fire fitted. You check whether the supplier is a Gas Safe (Corgi in the old days!) registered fitter. You might trust the Gas Safe logo on the supplier’s website, but if you’re thorough, you check out the Gas Safe Register and make sure your proposed supplier is registered.
Will Open Banking Become Effortless?
In the course of the last few years, we learned to embrace contactless payment. Perhaps some of us had initial reservations, but I’m guessing we’re now mildly irritated when contactless isn’t available and we have to pump in the numbers.
Open banking and the technology behind it is going to save us so much more than a couple of minutes at the till. It has the potential to save us significant amounts of money and time and my prediction for 2018 is that in 12 months time, it will feel as comfortable as contactless.
At Castlight, we have been preparing for open banking for 18 months, employing some of the best data scientists and cyber security people in the industry and developing the technology that provides consumers with the solid, secure digital platforms required for sharing the transactional data from their bank accounts. Over the next few weeks and months, myself and some of my talented team are going to look at open banking from a variety of angles, and tease out exactly what it means for consumers who want to take a new level of control over their finances.