What Exactly is Open Banking?

Will Open Banking help me when i am looking for short term loans? let us tell you a little about open banking in short term loans;

In 2011, MoneyDashboard launched as the UK’s first bank account aggregator. This meant that by providing your log in details for your bank accounts and financial products, you would see them all in one place.

You’d be able to get a clear, instant picture of your financial health, including your savings and debts. Bank account aggregators were hailed as important tools for budgeting and money management. There was only one problem…

It was strictly against the terms and conditions of most banks to share your username and password. And for good reason, too.

Whilst MoneyDashboard promised security and read-only access to your account so that you couldn’t use the website to transfer money, it opened up security concerns. Did users really want to be giving out the details that gave other people access to their money?

New Laws for Open Banking?

A new 2019 law has, quite literally, opened up your bank account details. With open banking, users can share important bank account information to make use of aggregation services.

Now, open banking is within a bank’s terms and conditions. Using something called Open API, you can give consent to share transaction data.

Now, third party providers including account aggregators, price comparison sites and lenders can look at your transaction history and use it for your benefit.

Who can benefit from Open Banking?

There are many times when open banking can be beneficial for individuals.

Perhaps you want to show that you can afford loan repayments, even though you have bad credit, by allowing a lender to look into your recent income activity. When applying for a short term loan, these loan companies want to understand not what you spend you money on, so much, but to see that you are not going to be put under any financial distress by borrowing.

Even if you have a low credit score or bad credit, when you apply for a short term loan the lender won’t just make a decision based on your low credit score, they will now be able to see you financial situation in full and make a decision based on a better picture.

Perhaps you want a comparison site to quickly review your monthly bills, and find you a better option?

Perhaps you want to see all of your accounts, including credit cards, pensions and even your short term loans, on one account aggregator screen? All of these are options with open banking.

Business owners can provide their accounts with direct read-only access to all of their bank account statements. This access makes business accounting easier than ever.

Are there any Risks to Open Banking?

As a user, you’re in control of who views what. You decide which information gets shared, and only give consent to the services that you want to use.

You can also withdraw consent at any time. If you stop using a service, you can ensure that the provider of that service can no longer access your data. When you provide consent, you can choose to provide access for a specific amount of time. You’ll also need to approve any transactions that take place.

Anyone that’s involved in open banking is regulated by the Financial Conduct Authority. Data protection laws apply, and all transaction data is encrypted. You can browse all regulated providers to make sure that you’re providing access to a genuine service.

Now, you don’t need to give out your account details to show others what’s in your bank account. You don’t have to hand over passwords, memorable dates or your mother’s maiden name. It’s your information to share, and open banking allows you to share safely.

Is Open Banking available Everywhere?

At the moment, only the largest banks are legally required to offer access to open banking. Many other banks and financial providers have voluntarily opted in. But, you may find that not all of your accounts can currently be shared through Open API.

Are there any other Benefits to Open Banking?

Open banking in short term loans is expected to increase competition, in many financial areas. By providing access to your transactions, you may be able to find a bank that can offer a better deal. You can also compare your energy bills, insurance bills and other Direct Debits more easily. If you have a low credit score, it’s particularly important to find the best deals when lenders will charge higher rates.

Comparison websites may be able to find ways for you to reduce your expenditure. Challenger banks, and smaller banks, may be able to show you how they’ll reduce your account fees and charges, or increase the interest that you earn.

Open banking is innovative. It’s one of the biggest changes to the banking system for many years. For the end user, it provides more control than most bank customers have ever had in the past. Now, you have the option to truly manage your money and to make decisions based on your complete financial health, without trying to juggle accounts from dozens of different providers.