Open banking

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Open banking is a financial services term as part of financial technology that refers to:[1]

  1. The use of open APIs that enable third-party developers to build applications and services around the financial institution.
  2. Greater financial transparency options for account holders ranging from open data to private data.
  3. The use of open-source technology to achieve the above.[2]

Open banking, as a concept could be considered as a subspecies to the open innovation concept, a term promoted by Henry Chesbrough. It is linked to shifts in attitudes towards the issue of data ownership illustrated by regulations such as GDPR and concepts such as the Open Data movement.

History[edit]

In October 2015, the European Parliament adopted a revised Payment Services Directive, known as PSD2. The new rules included aims to promote the development and use of innovative online and mobile payments through open banking.[3]

In August 2016, the United Kingdom Competition and Markets Authority (CMA) issued a ruling that required the nine-biggest UK banks - HSBC, Barclays, RBS, Santander, Bank of Ireland, Allied Irish Bank, Danske Bank, Lloyds and Nationwide - to allow licensed startups direct access to their data down to the level of transaction-account transactions.[4]

The new regulation came into force on January 13, 2018 and is set up by Open Banking Limited, a non-profit created specially for the task. However, enforcement rests with the Competition & Markets Authority. Protection for consumers will be done by the banks (for payments) or the Information Commissioner's Office (for data).[5]

Support for the concept is not unanimous. Mick McAteer, of the UK Financial Inclusion Centre, thinks that only the tech-savvy will benefit. He says that open banking is "a daft idea", which will lead to more financial exclusion for those on low incomes. He says it is naïve of regulators to expect consumers to own their data and be able to get better deals from banks, and points out the danger of consumers being exploited, either by businesses offering new types of expensive payday loans, or misuse of data and personal information that people have revealed in places such as social media.[6]

See also[edit]

References[edit]

  1. ^ "United Kingdom > Budget HM Treasury > the Open Banking Working Group (OBWG) > The Open Banking Standard" (PDF). Archived (PDF) from the original on 2017-04-18. Retrieved 2017-04-18.
  2. ^ Laura Brodsky and Liz Oakes (September 2017). "Data sharing and open banking". McKinsey & Company. Archived from the original on 2017-11-08. Retrieved 2017-11-07.
  3. ^ EU Commission. "European Parliament adopts European Commission proposal to create safer and more innovative European payments". EU Commission. Archived from the original on 2016-07-22. Retrieved 2016-05-04.
  4. ^ Rowland Manthorpe (October 16, 2017). "To change how you use money, Open Banking must break banks". Wired. Archived from the original on 2017-12-22. Retrieved 2017-12-29.
  5. ^ https://www.wired.co.uk/article/open-banking-cma-psd2-explained
  6. ^ Kevin Peachey; et al. (21 November 2017). "The Disruptors - Money". BBC News. Archived from the original on 2017-11-21. Retrieved 21 November 2017.