The technology uses open API's or Application Programming Interfaces. An API is basically an interactive messenger that takes your request, it tells a system what you want to do and then returns the response back to you.

An example of API's in action is an online shopping order, you select what you want to buy and place in your shopping basket, you then 'check out' and are directed to a payment page. Once you have paid your order using your payment information, your order is shipped to the address details you completed online.

Other popular services that use API's

• Netflix

• Twitter

• Facebook 

• Google 

• Ebay

There are 4 main groups who will benefit from Open Banking:

• Financial institutions - including start-ups and Challenger Banks to open up competition (Challenger Banks are smaller banks competing with the much larger, established High Street Banks). Larger banks are likely to make huge cost savings by reducing the need for branch based services.
  
  

• Third Party Developers - IT professionals specialising in API technology that want to innovate and influence the improvement and streamlining of financial services.
  
  

• Bank customers  - those who are digitally savvy using online and mobile banking already or early adopters are able to see immediate benefits with better regulation. If customers sign up to share personal data via third parties, additional benefits are promoted and listed below.
  
  

• Professional advisers - with an Open Banking customer's permission, advisers can access and verify transactional data instantly, this could be useful for lenders, mortgage brokers, financial advisers and debt advisers. Although, most professionals will not be able to rely on this information on its own.

There are a wide range of benefits and features available but please note that not all of them will be available with all Open Banking providers.

• Secure and safe online banking*
  
  

• Regulated and registered Open Banking providers
  
  

• More choice of financial institutions and products, tailored to your circumstances - see our 'A to Z of UK Digital Challenger Banks' web page.
  
  

• Apply for products online and via an app, such as mortgage, savings account, overdraft, loan, credit card
  
  

• Simple and fast ways of transferring money in-between banks
  
  

• More control of your data and easier access to your transaction data
  
  

• Cheque imaging to pay cheques in, offered by: Lloyds, Barclays, HSBC, Clydesdale & Yorkshire, HalifaxBOS
  
  

• Card management if lost, stolen or damaged
  
  

• Voucher offers via your mobile app
  
  

• One app can host all of your (participating) bank accounts, you can get a clearer picture of your collective transactions and budget
  
  

• You will get early warning of an overdraft and a grace period to correct it to avoid overdraft charges
  
  

• View transactions and upcoming payments, your bank will show you what money you have left to spend before regular payments have come out
  
  

• Businesses using certain banks will be able to comply with the new HMRC rules on digital tax and VAT records
  
  

• Automatic savings transfers, eg. Lloyds Bank Save the Change®
  
  

• Realistic borrowing with lending decisions based on accurate and up to date financial information that does not overcommit you
  
  

• Budgeting apps to help you plan, save and keep a check on your spending
  
  

• Banks are required to publish accurate and unbiased information in branch and online
  
  

• Certain financial institutions are committing to work with consumer groups to make Open Banking apps accessible and inclusive, eg. Nationwide Open Banking for good (OB4G)

Some leading financial experts are concerned about the longer term effects of Open Banking which is in an early phase of development and roll out.

• Many of the promoted 'Open Banking' benefits (listed above) are still available to you within mobile and online banking even if you do not sign up for Open Banking to share your data with third parties.
  
  

• Only early adopters and consumers using mobile and online banking will benefit. Hard to reach groups are likely to continue to be disadvantaged for some considerable time.
  
  

• Branch banking has already reduced further with branch closures leaving rural communities and local businesses reliant on cash without a local bank service.
  
  

• *With a complex chain of third parties all with access to a person's financial data, liability for any fraud/theft losses incurred remains unclear.

• *Although the highest cyber security protocols are required under Open Banking regulation, there is never a 100% guarantee that security cannot be hacked. Under open banking, more data could be hacked and stolen at one time when third parties are authorised.
  
  

• Exclusive strategic partnerships between larger banks/financial institutions and third parties are likely to limit the products targeted to consumers which would be the exact opposite of Open Banking intentions for consumers.
  
  

• Not all credit providers and financial institutions are signed up for Open Banking, this means that Open Banking will not, at this time,  guarantee a consumer's whole financial picture. The Open Banking data cannot be relied on, this could mean that beneficial products will not be offered to consumers that need them and are entitled to them.
  
  

• Open Banking money management and budgeting tools will only ever be effective and accurate if all personal financial data is pooled together. This means that all parties to a connected household budget, with sole named accounts must be signed up to Open Banking for any projections/predictions to be helpful and meaningful.
  
  

• Only one party to a Joint account is required to give consent i.e. the same access and signatory controls are applied as with your ordinary joint account. This could worsen financial abuse situations within relationships and create conflict that did not exist before. It also confuses the issue of having independent finances in a relationship and/or a household
  
  

• The regulations stipulate that consumers must be advised that they do not have to sign-up for Open Banking but by virtue of the above 2 bullet points, consumers can feel pressured and forced to sign-up in order to access beneficial products, to provide accurate information for households and whereby they are joint account holders.
  
  

• Nine banks and building societies have been forced under regulation to share your data with your permission, six of them required an extension, this has slowed up the amount of information coming out to the public. It also demonstrates that many banks are not as prepared as they should be for something that requires a lot of consumer awareness and understanding about the sharing of their private financial data.

• During this silent financial revolution, statistics and research suggests that consumers are very wary of the concept of opening up their data to third parties, if consumer behaviour and attitude does not change, then a lot of financial investment is going into new processes and systems that will have limited use and value.
  
  

• A very similar government initiative - the Midata scheme, a few years back encouraged consumers to share their account details with comparison providers in return for advice and the opportunity to switch accounts to obtain a better deal. It was a flop amid security fears and lack of enthusiasm from the public.
  
  

• With Open Banking, we move closer and closer to a cash free society and it is not clear how or what any of the Open Banking financial institutions are doing to redress this balance. The World Economic Forum outlines the pitfalls of a cash free society. The Access to Cash report 2018 highlights the essential need to address:
  
  

1. Access to cash

2. The Acceptance of cash

3. The cash infrastructure

4. Digital payments that work for everyone

If you decide that any part of the Open Banking benefits are helpful to you, the next most important thing to do is to check that the firm is regulated. You can do this by:

• Searching the Open Banking register

• Searching the FCA register check for permissions:  
  
  

1. Account information sharing services such as budgeting apps and price comparison sites that let you view accounts from multiple providers in one place. 

2. Payment initiation services that allow you to instruct payments to be made directly out of your bank account, as an alternative to using a third party such as a Visa debit card or PayPal.

When you sign up for an Open Banking service or app, you will be shown information that the provider needs your permission to see. You will be asked to give your explicit consent for the provider to access this information. You will be asked to renew your authorisation every 90 days.

Your account provider, such as your bank, double checks that the third party has your consent for you too. Before connecting any service to your account, your account provider will confirm that you want to share the information.

Important considerations

• If you operate a joint account, discuss Open Banking consent with your partner first.
  
  

• If you have a connected household budget with independent finances and accounts, consider the limitations of Open Banking without complete household financial information and how this will impact the accuracy of any budgeting, money management tools and products made available to you.
  
  

• You must not share anyone's personal or financial information through your Open Banking without their express permission, unless via the joint bank account consent.

You can either visit your online banking provider to remove any permissions or remove your permission directly with the service provider. Most providers should provide a dashboard that makes revoking access clear and simple.

Under the General Data Protection Regulations (GDPR), you also have the right to: request a copy of the personal information a service provider holds about you, this is known as a 'Subject Access Request'. You can request that you personal data be erased, this is known as a 'Right to Erasure'.

When a person seeks debt advice, much of the debt advice process (please also see 'Your Debt Advice Journey') relies on gathering facts and information about a person's financial circumstances before and during unmanageable debt, and then for longer-term future proofing. Below are some things to consider about Open Banking in the debt advice process:

• Most experienced debt advisers confirm that their client's financial information is complex and that the financial information gathered comes from a variety of sources.
  
  

• Open Banking is in a Beta phase (still in a testing, unproven phase), whilst people in debt often present themselves with vulnerabilities, including mental health problems. Therefore, should debt advisers be encouraging potentially vulnerable persons into an experimental marketplace before their financial affairs are regularised?
  
  

• At this time, unless a person's finances are uncomplicated, Open Banking does not cover anywhere near enough financial institutions to provide meaningful data about a person's overall finances. In fact, if used in isolation, it could very easily misrepresent a person's finances and provide an incorrect debt strategy outcome.
  
  

• Consumers often seek debt advice when they have become frustrated and feel (in their own minds and sometimes justifiably) harassed by their creditors (financial institutions). The likelihood of a debt advice client knowingly consenting to open up all of their financial data to financial institutions through Open Banking at this stage in their finances is extremely slim, and potentially not best advice.
  
  

• A person with mobile/online banking can easily obtain their bank statements already without signing up to Open Banking to share their financial data with third parties.
  
  

• People in debt often come with other problems such  as relationship issues, the concerns over Open Banking consent in relationships are that it can worsen extremely sensitive situations and can therefore potentially do more harm than good.
  
  

• Debt can belong to an individual in a connected household budget or to all parties in a connected household budget, but not everyone will necessarily want to consent to Open Banking. By adding an extra layer of data sharing consent through Open Banking, debt advisers risk gathering less information from a household than they did previously and this will limit the quality and accuracy of advice considerably.
  
  

• Debt advisers need to establish high levels of trust with their client and proceed cautiously with advice on credit lines and bank accounts (please see Right of set-off and Safe bank Accounts). The opening up of an indebted person's financial data to third party financial institutions when it can already be obtained through mobile/online banking seems at extreme odds with current debt advice practices. Whilst it may be quicker for a debt adviser, is it really in the best interests of the client?
  
  

• As explained in the 'Cons' section above, open banking money management information is highly likely not to represent an indebted person's complete financial situation, the practice of robbing Peter to pay Paul is common and is complex to unravel for even the most experienced debt advisers. Therefore Open Banking is not currently a reliable source to use when advising on a person's appropriate, sustainable and affordable debt solution.
  
  

• For people in longer-term debt solutions, and once finances and debts are controlled and manageable, Open Banking might add value and be more attractive and beneficial to a person.
  
  

• Once more is known about Open Banking and if it is rolled out wider and successfully, there may be greater benefits for debt advisers but this will still depend quite rightly on whether a client wants to consent to Open Banking.