In wake of the Cambridge Analytica scandal, the real price of ‘free’ tech platforms has been exposed. Access often comes at the cost of handing over reams of your personal data. GDPR, data protection regulation that triggered the inbox-cluttering privacy
emails in May, should help protect consumers by requiring companies make clear what personal data is being collected and how it’s shared. Now that you can see what companies are doing with your data, it’s time to demand more in exchange for sharing it.
Car and health insurance companies are already pioneering exchanging data for discounts. If you install a telematics device in your car or wear a movement-tracking wristband, you can get cheaper insurance. Just as the Fitbit made it possible for insurers
to track exercise habits, recent regulation called Open Banking makes it fast and secure to share financial data directly from your bank. Previously, only your bank could use this data to decide to give you a mortgage, upgrade your account or arrange an overdraft.
With Open Banking you can now shop around for the best deals and get products customised for your specific needs.
Why Open Banking?
Open Banking allows you to manage the financial data your bank or building society generates from your bank account. Budgeting apps, price comparison websites, and loan providers can find you a better deal and help you save money by using the data your bank
already holds for your account. You can use Open Banking to authorise your bank to securely share your financial history with FCA-authorised
regulated providers (including Credit Kudos, Funding Xchange, Yolt and Bud) and the companies and lenders who work with them. Don’t want to share? You don’t need to do anything. Open Banking is opt-in only.
Find a better deal
Open Banking creates more equal competition between your bank and other financial product providers, allowing you to get better deals. Let’s say you are looking to borrow money to purchase of a new car, or shopping around for a short term loan to finance
a large purchase. Comparison websites and lenders can use the financial data available through Open Banking to instantly and accurately tailor products and services to match your needs. Before Open Banking, only your bank was able to use your financial history
to do this. Now, you can shop around for better, more customised rates.
Although technology has improved speed and ease of banking online, for many people, borrowing money means going to a bank branch in person, or completing part of the process with an online lender only to be asked to send months of paper bank statements and
proof of income. Open Banking changes that. Because lenders can access consolidated information directly from your bank, you no longer need to send in copies of mail or scans of bank statements. Applications can now be finished completely online, even for
borrowers who may have a bad credit score or not much credit history.
Accurate credit scoring
Have you ever been late paying a bill, or run into financial difficulty? Your credit score may have been affected, and negative incidents can stay on your report for years. Unlike a traditional credit score, the financial information directly from your bank
can provide more detail than just a number. Lenders who accept Open Banking data in lieu of a credit check accept more borrowers by looking beyond your credit score. For renters and young people who may not have taken out debt before, using your financial
footprint is a great way to prove your creditworthiness. Unlike traditional credit scoring, you’ll never be told to take out credit just to boost your score.
Moving house (or country)
Moving house can be stressful, and waiting for your prospective landlord to verify your identity and financial history can be a manual and time-consuming process. The ability to share your financial data directly from your bank means that you no longer need
to wait weeks before moving in. As Open Banking spreads to the EU and beyond, you’ll eventually be able to take your credit with you as you move. Automated bank verification means lenders, landlords and phone providers can seamlessly accept your financial
history as proof of trustworthiness.
The future is now
Data sharing need not be scary. With Open Banking, you’ll never be asked to share your password or login details with anyone other than your own bank. Your bank only shares data through a secure connection with verified, FCA-authorised companies, and your
data will never be shared without your consent. With easier data sharing, finance can become more customised, with products tailored to fit your unique needs. It’s important to remember that your data is valuable, and you should understand what you are getting
in exchange for sharing it. If nothing in life is free, beware of the offer of something for nothing.