Un­locked, a trea­sure trove of data

Cus­tomers can now switch lenders in an in­stant, yet se­cu­rity fears re­main, writes Iain Withers

The Sunday Telegraph - Money & Business - - Business -

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

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