Britain will launch the world’s first experiment in “open banking” this week with a series of reforms that the government hopes will revolutionise financial services and open the door to new entrants such as Google, Facebook, Apple and Amazon.
Britain’s Open Banking Standard comes into force on Saturday, imposing sweeping changes to how banks operate and offering new opportunities for non-bank competitors. The European Union plans to introduce similar measures later this month and many other countries, including Canada, are considering following suit.
The idea behind open banking is to give consumers and businesses more control over their bank account information, and make it easier for them to share those details with third parties. The goal of Britain’s Open Banking Standard is to clear the way for financial-technology companies to use that information to create powerful apps that will provide a host of services such as managing multiple bank accounts, finding loans and handling accounting. While some of those services are currently available, they are cumbersome to use because customers can’t easily share their bank-account details and have to either download the information from a bank’s website or hand over their password. With open banking, account information can be instantly shared without a customer revealing their password. It also opens up more direct payment options at retailers so that, for example, shoppers could use an app on their phone at the grocery store to scan individual items as they fill their shopping cart and then press a button to pay the final bill when leaving.