Open banking launched on January 13 in the UK. It requires major banks to share data with third party financial providers. This will bring a new level of transparency and encourage competition, shaking up the financial services industry and levelling the playing field for new challengers to take on the more established high street banks.
The reforms follow a 2016 investigation by the Competition and Markets Authority into retail banking. Its report concluded that the existence of barriers to entry for smaller and newer banks made the banking market less competitive.
This paved the way for open banking, which requires banks to securely share customers’ financial data with other financial institutions – provided customers give their permission. This should boost the range of products and deals made available to people and facilitate more switching, with offers better tailored to individuals, based on their past spending habits.
It will also enable people to bring together their financial information from different providers so they can, for example, open one app and see a list of their accounts with other banks.
All in all open banking is set to change the financial services industry in several ways.