Unlocked, a treasure trove of data
Customers can now switch lenders in an instant, yet security fears remain, writes Iain Withers
You’ve decided to dump the bank you’ve been with most of your life. A current account offered by a rival – perhaps with a cheaper overdraft, better rewards or helpful budgeting tools – looks enticing online. What next?
Until this weekend it would have taken up to seven working days to switch – account details, direct debits, standing orders and all. You may have needed to troop down to a branch of the rival bank armed with a wad of transaction statements.
This faff is one of the reasons Britons are statistically more likely to get divorced than switch banks.
Open Banking, the new rules designed to usher in a digital revolution that came into force yesterday, is meant to change all that.
Under the reforms, customers are given the keys to their own financial data, enabling them to change providers in minutes with a few simple clicks. Consumers will be in control – data will only be transferred to another lender if the person gives explicit permission when they want to take up a better offer elsewhere.
Challenger banks and start-ups hope the reforms will break the dominance of Britain’s big five lenders – RBS, Lloyds, Barclays, HSBC and Santander.
But there are reasons to be sceptical. Consumers have serious privacy and security concerns about sharing financial data, while large incumbents have reason to be quietly confident that habitual UK consumers will not all rush to switch at once.
Imran Gulamhuseinwala, trustee of the Open Banking group charged with implementing the rules, has to persuade people it’s worth it.
“Consumers can take back control of their data,” he says. “They should see a real benefit from this. We know they’re not getting a good enough deal on products like overdrafts and savings accounts.”
A Competition and Markets Authority (CMA) study two years ago found just 3pc of UK current account customers change provider in any given year, despite the potential to save up to £92 annually.
Gulamhuseinwala believes Open Banking should drive tangible benefits behind the Open Banking changes. The regulator is enforcing the rules on nine of the UK’S largest lenders in the hope it will boost competition.
However, last month it emerged five of these – HSBC, Barclays, RBS, Santander and Bank of Ireland – will miss next month’s deadline.
They were granted more time to fully comply, from a few extra weeks to several months. But they could face steep fines if they fail to meet these agreed extensions.
The remaining four – Lloyds, Nationwide, Allied Irish Bank and Danske – were due to launch on time yesterday. Other smaller lenders have voluntarily signed up.
“It’s a rolling start, not a big bang launch,” says Gulamhuseinwala. “The majority of coverage will be in place and we’ll continue to roll it out.”
This will be built out from current accounts and payments to include credit cards, e-wallets, direct debits, standing orders and international payments over the next 18 months.
The big five are not sitting ducks as they have been investing heavily in their online and mobile offerings.
So opinion varies on how disruptive the changes will prove. Jake Morgan, a senior analyst at Forrester specialising in digital banking, is one of those predicting big change.
“If data is the new oil, payment data is the best quality oil out there,” Morgan says. “It stands to reason a host of new providers will want in.”
Among those expected to capitalise are challenger banks like Clydesdale and Yorkshire Banking Group (CYBG), nimble digital start-ups like Monzo and Starling, and even overseas banks targeting a chunk of the UK’S retail banking market such as Dutch lender ING’S digital arm Yolt.
Fraser Ingram, director of innovation at CYBG, says the lender’s digital banking brand “B” is partnering with start-ups to develop better mobile apps that help customers manage their finances better. “It used to be