Gone are the days where you’re
expected to deep dive into piles of
sensitive financial data in preparation
for applying for business funding.
Thanks to Open Banking, you share
the minimum data required for the
product or service you want to access
through a secure, digital journey.
Open Banking transformed the way businesses and consumers access financial products for the better. It’s meant that organisations and individuals have been able to take control of their own financial data, to drive better outcomes all round. Legislation introduced in 2018 meant that we now have the choice to share our banking information with trusted third-parties to unlock the best financial services and products.
Almost a decade ago, the Competitions and Markets Authority (CMA) began a review of the UK retail banking industry at the time.
After a lengthy three year review, the CMA finally published a report mid 2016
that identified that the financial services industry was lagging behind in terms of both innovation and competition.
It discovered that smaller financial technology (Fintech) companies find it impossible to penetrate the banking market as the sector was unfairly dominated by incumbent banks.
As a result of the review, the CMA and Government ordered the 9 biggest banking players, aptly titled CMA9, to start rolling out Open Banking API’s that allow the safe sharing of data from one party to another,
The deadline outline for the complete rollout of the APIs was January 13th, 2018.
PSD2 is a directive from the European Union, which lays out the requirements for banks and businesses in the financial services sector to improve consumer protection, ensure that payments are safer and more secure, and to decrease the costs of payments services.
...Open Banking isn’t the new kid on the block anymore, as it was actually introduced almost 5 years ago! It’s strictly regulated and totally safe!
It’s secure, it’s fast and perhaps most importantly for businesses, it’s effortless. Already, more than 6 million businesses and consumers in the UK already use it, so the trial period is well and truly over!
Apps and services are regulated by the Financial Conduct Authority, which oversees UK financial services firms and markets. Regulations dictate that third parties must stringently protect your data once you provide access.
Open Banking was created with security at its heart.
Bank-level security – Open Banking uses rigorously tested software and security systems, so you can rest assured that your data is completely secure. In case you didn’t already know, you’ll never be asked to provide access to your bank login details, PINs or passwords to anyone other than your own bank or building society. If this ever happens, that’s a red flag, so stop immediately.
It’s regulated – Only apps and websites that are regulated by the FCA or a European National Competent Authority can enrol in the Open Banking Directory.
You have the power – You choose when, with whom, and for how long you provide access to your data, so no one can access it without your say so.
Extra protection – Your bank or building society should pay your money back if a payment is made which is unauthorised.
Also, you’re protected by strict data protection laws and the Financial Ombudsman Service.
Changed your mind?Don’t worry. It’s just as easy to withdraw your consent as it is to grant it. You can revoke access and opt out at any point!
Open Banking is creating huge shifts in how individuals and businesses look after their finances. Fintechs present many benefits that are helping to revolutionise the banking industry. For expanding companies and entrepreneurs this creates the ability to improve their financial intelligence through a number of game changing means.
Once access is granted, Open Banking can help track a multitude of financial metrics into a centralised interface. From spendings and savings, to investments, Open Banking can draw data from across all of your bank accounts, presenting you with a ‘bigger picture’ of financial insights that would otherwise require an individual to log in to different banking portals and manually accumulate the data.
Because your financial data is presented in a centralised interface, either through an app or desktop, individuals and businesses looking to borrow money can present their finances, and lenders can quickly determine whether a facility is right for them. It also helps lenders figure out the correct financial package for a borrower, speeding up the process and improving financial services for both the borrower and provider.
Open Banking automates a number of important processes, including bookkeeping, tax filing, budgeting and more. It saves time and effort for individuals and businesses, and is also why fintechs are becoming must have tools for accountants and brokers.
Thanks to the use of APIs, only authorised providers will be able to see your financial data. It is protected and ensures secure controlling and sharing. Open Banking users always maintain complete control over who can access their data, it requires explicit consent, and can be withdrawn at any time.
Using Open Banking will grant you and your business much greater control over any financial data, plus, because it is presented in such a transparent way, it makes it much easier to understand what is happening with your money!
There are a number of ways the robust security measures Open Banking uses work to protect the financial data of its users, ensuring secure transmissions of financial data. The primary ways in which fintechs achieve this are:
Open Banking uses secure Application Programming Interfaces (APIs) for data sharing. This means the channel of communication between banks and all third party providers is secured through numerous levels of security, ensuring the safe transmission of important financial data.
In the UK and EU, third party providers are regulated, and must be approved by recognised financial authorities such as the Financial Conduct Authority. By complying with these regulations, providers are enforced to follow stringent data handling and security protocols.
Your data is never shared without your explicit consent. You will always maintain complete control over what data is shared, with whom, and for however long you continue to use Open Banking. It’s safe, simple, and you can revoke access at any time!
One of the primary safety measures APIs take when transferring sensitive financial data is encrypting it through ‘tokens’, which are essentially unique identification symbols that retain all of the essential data regarding your bank accounts without any danger of information becoming compromised.
Strong Customer Authentication (SCA), is a process which requires at least two independent sources of validation to verify your identity. It can be something you know, such as a Pin or password, an item you own like your phone, or will require a fingerprint or facial recognition. This helps create an even greater measure of security to ensure your financial data is kept secure.
If you are using Open Banking providers or online accounting software solutions like Pulse, you will always maintain control over who has access to your business data, including the financial insights obtained from the data analysis they provide. If you want, or need to revoke access to your open banking data, there are two ways to stop:
For whatever reason you have to revoke access, doing so will safeguard your financial data, ensuring it is only shared with partners you have trust in. Regardless of which open source bookkeeping software you use, it is advised to always prioritise maintaining control of your financial data, and do your due diligence on the bank or fintech provider you seek to work with first.
Access to your banking information is controlled specifically by the permissions you give to your Open Banking provider. You decide which apps and websites you want to use and share data with, maintaining complete control over your financial information.
In practice, Open Banking grants third-party financial service providers access to consumer banking and financial data through the use of application programming interfaces (APIs).
You can choose the specific data Open Banking sees, for example, if you want your provider to only view account balances or transaction history from just one of your bank accounts, that is a possible option.
You maintain full control by deciding which permissions you want to grant Open Banking before consenting. Reviewing privacy policies and doing your due diligence will also ensure you fully understand how your data is being used. Remember, access to your banking information can be revoked at any time, so the choice of access always remains in your hands.
Due to the concerns of safety in today’s digital age, and despite the proven track record of security that Open Banking and other open source bookkeeping softwares have, it is still worth mentioning the need to seek FCA approved providers to ensure the security of your financial data, bringing you some peace of mind over the control you have.
You can search Pulse’s financial technology partners and list of trusted FinTech integrations here to help choose a reliable provider, and start enhancing your business financial intelligence today!
Open Banking can be used with any payment account that you have online access to, including your personal and business current accounts, credit cards and online e-money accounts. Because Open Banking requires online or mobile banking to access your financial data, your accounts will already need to be online before your chosen provider can integrate with them.
An Open Banking interface is also capable of handling more than one account at a time, regardless of the financial institution. If you are running a business and have different account types with different banks, this multi-account handling allows for a more consolidated and unified approach to managing your finances, creating a much clearer picture of your financial data.
By having the ability to manage multiple accounts simultaneously, small business owners or start ups who may currently have multiple sources of income, or have separate accounts for personal use, can still monitor and manage every different type of account on a single unified platform.
Businesses in particular can capitalise on this expanded account access because of how effectively it simplifies the financial management process. Instead of needing to log into different banking interfaces or manually collecting data, a single dashboard will provide a business with financial insights, grinding a comprehensive picture of your financial health.
Pulse uses any account types you have granted Open Banking access to and then gives real time financial insights for you or your business to act on, we can also integrate with any Open Accounting programs your company uses to grant accurate financial reports, freeing you up to focus on the more pressing demands that come with running a business.
As with other third party programs (TPPs), Open Banking will be able to see relevant and necessary information related to your bank accounts. Exactly how much a provider can see will depend on what accesses you grant it, typically there are a few bits of data required for an Open Banking app to produce its financial reports and business insights.
It’s important to remember that you retain complete control over who can see this data, and it’s only shared with your explicit consent. Remember to regularly review and manage your data sharing permissions to maintain financial security.
Open Banking itself won’t cost you a penny as it’s completely free, and you can maintain access to open banking tools without incurring additional costs. This financial innovation empowers you to take control of your financial data, providing a platform for business analytics and strategic planning.
Though of course, while Open Banking is free, remember that the apps, websites, and services that utilise Open Banking – from online bookkeeping software to specific tools for accountants – may charge you for using their products and services. Charges can vary widely, and might be one time, recurring, or usage based. It’s important to understand the costs involved before deciding to use any product or service.
AISP stands for Account Information Service Provider. This is a designation given to businesses that have been granted permission to request consent from people and businesses to connect to their bank account and use their account information to provide a service or product. These FinTech services can include services like open bookkeeping, business auditing, and providing small business financial insights to budding entrepreneurs.
While the AISP can view and analyse your data, it is important to remind potential users that their access is read-only. This means they can’t move any money or make any transactions on your behalf. Their role is limited to looking at the data, and using it to provide the financial insights obtained through their service or product.
An API, short for Application Programming Interface, is essentially a set of digital rules and protocols for building and interacting with software applications. It’s a way for different software applications to communicate with each other and exchange information securely and efficiently.
APIs are the technical backbone of Open Banking and any other open source financial technologies, enabling secure data sharing, user control, and the development of innovative financial services like Pulse.
When it comes to Open Banking specifically, APIs play an important role, serving as a secure bridge between third party providers (whichever financial app or service you use), and your bank. They offer a number of important security services to Open Banking users:
APIs grant authorised third party providers secure access to the financial data of your bank accounts. Thanks to this, numerous applications from different banks can be used together in a single interface, allowing you to access the financial insights in a single interface.
Data access is safely controlled through APIs. You can choose which data you want to share, and who it gets shared with, regardless of how specific it is. It also makes it easy for access to be revoked at any time, with APIs enforcing these permissions according to your instructions.
The advanced security protocols that APIs bring such as data encryption means your financial information is always protected during transmission. For example, instead of account numbers being sent, an API will send a ‘token’ that represents your data, making them extremely secure and effective.
In the process of APIs allowing third parties to access financial data, the services are constantly improving and innovating new methods to ensure their service users banking information remains safe and secure.
Whether or not you can use Open Banking services internationally will depend on both the individual regulations of a country, and also the specific services and terms and conditions of the platform you are currently using.
If you are UK based, Open Banking has the regulatory support from PSD2 and the UK’s Open Banking initiatives, this is also something that covers all EU countries. If you are seeking an off-shore bank account, you should inquire with your service provider, as it is likely that it will be possible.
Entrepreneurs looking to use Open Banking service outside of the EU may come across regulations or incompatible technologies, plus agreements between international banks would need to be arranged, making the idea of international Open Banking a complex issue. It is worth noting that fintechs are constantly growing and evolving, and it is likely that international usability will expand in the future.
Yes, you can ‘opt-out’ of Open Banking at any time. Remember that your account information is never available as a default option. You have complete control over who can see the data stored within your account and you have to grant access, so you will never need to opt-out unless you’ve previously provided access.
If you are already using Open Banking then you will have consented already, and will have granted a provider access to your financial data. Every action requires explicit permission to be granted. Once you choose to revoke access and opt out, any third party providers who had access to your financial data will no longer be able to view your accounts.
Before you choose which provider you will work with, it is worth understanding their data retention policy, as they may choose to keep what data they did view even after you have opted out.
