Open Banking is a term not many people are familiar with; even if they have, many people have negative perceptions of what it is and how it’s used. The truth is that Open Banking is a wonderful tool that empowers organisations like Finwell to offer useful services to their customers. Without it, we couldn’t do what we do. But what is Open Banking, really? It may seem confusing at first, but we’re here to break it down for you.
So let’s start by defining Open Banking in simple terms. At its core, Open Banking is a secure way for service providers to access the financial account data of their customers in order to provide them with regulated products and services. Starting to make more sense? Let’s use an example from the real world to show you how Open Banking is used in everyday life.
Let’s say you’re applying for a loan. The lender needs to consider more than just your credit score in order to determine whether or not you’re eligible for the loan, right? So instead of asking for separate documents in order to verify the financial information needed in the application process, they can request access to view the necessary information from your bank. All you have to do is give your consent and connect your account with the lender, and you’re in business! Your bank will then provide the lender with the information they need, all through the sanction and security of your bank. That’s the process of Open Banking in action!
So how common is this practice? And How secure can it really be?
Open Banking is actually more common than it may seem. All UK-regulated banks are required to let you share your financial data such as your spending habits, regular payments, and companies you use (basically your bank, credit card, or savings accounts) with authorised providers that offer useful financial or budgeting apps, as well as online tools or even other banks – just so long as you give your permission. These authorised providers then use that information acquired through Open Banking practices to better serve you financially, such as through offering more options for loans, lower APR rates, and much more. So in short, it’s very common, and quite secure!
But how exactly does Finwell use Open Banking?
Finwell uses Open Banking to gain access to the financial information in your current account, such as incoming and outgoing monies to gauge your spending habits from month to month. We then use this information to get a better overall understanding of your financial standing. We then use this information to calculate your financial health score! This is also how we are able to give you personalized tips and tricks based on your individual circumstances. So as you can see, Open Banking isn’t a scary thing, it’s at the heart of what we do, and it empowers us to help our customers take their first steps towards better financial health.
For more information on open banking, check out https://www.openbanking.org.uk/