For many, when new legislation in the form of Open Banking came into force on 18 January 2018 it passed with very little fanfare. However as with lots of modern technology, the regulations opened up a world of new opportunities for both individuals and businesses alike to take control of their financial data.
The legislation aims to improve competition and innovation to the financial services market by allowing customers the ability to share financial data such as spending habits, regular payments and the companies you pay to third party apps which can analyse the data in a variety of ways.
This technology is already available to many as the nine biggest UK banks are mandated to make their customers data available for sharing at the customers request. Smaller banks can choose to be a part of Open Banking but are not mandated by the legislation, therefore it’s a good idea to check the Open Banking Website to see if your bank is taking part.
Around 4.5 million people are estimated to already have a digital-only bank and 8.5 million intend to get one over the next five years, according to data from Finder. The increased use in accessible technology has allowed new challenger digital-only banks to thrive and grow. Offering competitive accounts to both personal and business accounts, a new account can be created in less than a few minutes and managed fully within their Apps. This provides a real-time connection with customers finances, providing push notifications for account transactions and reports on spending insights.
A Single View of All Accounts
One of the biggest benefits from Open Banking is that there is a common data format being implemented across the banks taking part. Apps such as Yolt and Moneyhub are just two examples of Apps that make use of this shared data format to present a single program that can manage all of your different bank accounts in one place, saving you from logging into each account separately.
Technology has advanced over recent years to the point that not only will Apps provide a single place to conduct your finances but it will analyse and even advise you on your spending habits.
Apps can now quickly show customers where money is being spent and analyse between fixed and variable/discretionary spending, helping to identify where money can be saved. Debt management tools can also provide overdraft alerts and recommendations for better products offering lower interest rates or overdraft charges.
In addition, ‘Savings’ Apps are available that can assess how much you can afford to save and then automatically move that money into a savings account for you.
We have also seen the introduction of finance applications being directed entirely through an App connected by Open Banking. By simply providing authority to share their data with the credit provider, they are able to quickly assess regular income and expenses to determine a more personalised offer or simply to credit check the applicant.
Whilst ‘Bank Feeds’ have existed for a while for accounting software, Open Banking provides a new platform to expand this across previously unavailable banks and improve the registration process. The automatic import of bank statement data to accounts software can save enormous amounts of time from manual entry but also for processing by creating rules which automatically analyse bank transactions.
At Thomas Westcott, we are Elite ProAdvisors for QuickBooks Online and Gold Champion Partners for Xero, two of the leading cloud accounting providers in the UK and have significant experience with assisting clients in their transition to digital technology.
Stuart Pedlar, Accounts Manager