Open banking is a way that you can give financial information to providers without risking your security. If you already use online and mobile banking, you can use open banking for easy access to payment processing, financial data, and even comparison shopping. Open banking is quickly becoming the preferred way to perform financial transactions in the UK and around the world.
How Is the Open Banking Standard in the UK Leading the Way?
The Competition and Markets Authority established open banking on behalf of the UK government in order to streamline and modernize financial services. Because all providers submit to regulation by the Financial Conduct Authority (FCA) or similar European regulatory bodies, you can be very confident in the safety of open banking transactions. Countries like Canada, South Korea, and Australia are quickly trying to emulate the UK model, and many more countries will, no doubt, soon follow.
How Did Open Banking in the UK Come About?
The Competition and Markets Authority saw the need for some kind of workable open banking system years ago. After the financial crash of 2007, a global push came about to allow financial service companies to innovate without becoming too powerful and getting crushed under their own weight.
Prime Minister Gordon Brown leapt into action, under advice from Tim Berners Lee, to generate a system of users’ rights with regards to public data and to make this data available. The UK quickly discovered that data sharing is both feasible and necessary for fair financial markets, and so open banking was born.
In 2013, the Treasury started looking into banking APIs as a method for enforcing antitrust principles and improving competition. In 2015, the Treasury added APIs for banking data to the budget. By 2018, with the passage of PSD2, open banking was launched in force, affecting major banks, credit and debit cards and even e-wallets. The future of open banking looks incredibly bright, both in the UK and around the world. Open banking is the future of finance.
What Open Banking UK Regulation Information Do You Need to Know?
Many feel that the Open Banking Standard is critical to the success of open banking. The Open Banking Standard is a UK initiative that was put forth by the Open Banking Working Group in 2015. The idea is that financial data can be publicly shared through a UK open banking API system. This would enable third-party apps put forth by financial companies to easily and safely give users access to their financial data.
PSD2 vs Open Banking
Is open banking the same thing as PSD2? The answer is yes. PSD2 simply stands for the formalization of open banking through the Payment Services Directive 2. It means that the nine biggest banks in the UK — Lloyds, Nationwide, Danske, Allied Irish Bank, Bank of Ireland, HSBC, Barclays, RBS and Santander — agree to release their data in a secure, standard form so that approved organizations can share it online.
Some of this data then gets passed along to approved third-party app developers, who create apps that maximize convenience for citizens seeking financial information and the ability to make smooth financial transactions.
What Are the Benefits of Open Banking?
The benefits of open banking are virtually unlimited. Banks can use open banking to make sure that there is a secure, standard format for all financial transactions, including ones in which third parties are authorized to access customer data.
With open banking, financial institutions know that they can rely on the data they receive from third parties, data they can only provide with the consent of the consumers who are the subjects of that data. Consumers, in turn, enjoy a whole new world of financial products and services that add convenience and give them more flexibility, thanks to third-party apps that are approved to securely handle their data.
How Can You Take Advantage of Open Banking in the UK?
If you work with Hydrogen, you can take advantage of open banking through Atom, our personalized open banking solution. The Hydrogen Atom platform provides you with superior REST APIs, complete with modules designed specifically for financial tech applications. You can use the Nucleus API to develop core digital infrastructure and set single or multifactor authentication, easily store and encrypt client data, manage accounts, and much more.
To learn how Hydrogen Atom works, get started by requesting a free demo from Hydrogen today.