New open banking regulations, which came into effect on 13 January, could bring changes to the sector that could transform financial services and benefit start-ups.
Open banking forces UK banks to open up their data via a set of secure application programming interfaces (APIs). This means banks will shift from being one-stop-shops for financial services to open platforms, where consumers can start to embrace a more modular approach to banking by giving verified third-parties direct access to this data.
As a spokesman for the UK’s retail banking investigation said, “open banking will make a transformational change to banking for personal customers and small businesses”.
As he pointed out, for the first time, innovative and secure apps are now able to provide people with personalised services and information to cover all financial needs in one place, and this will make it easier for them to choose a suitable bank account.
The new APIs will make payments faster and easier for small businesses because they are designed around the needs of today’s businesses rather than an existing legacy banking system.
With a customer’s permission, banks can now share the archive of consumer spending data with finance providers, tech companies, and retailers.
This will lead to a better future for financial services, one that increases competition and creates a greater consumer experience. More businesses will be able to deliver services that are tailored and relevant to individual customers, ultimately transforming their consumer experience.