Since 2018, Open Banking has changed how customers can access a range of financial services. However, while the concept is relatively straightforward to understand, many people are still in the dark about how Open Banking can help. As such, we’ve answered five Open Banking FAQs below to help you better understand what it is and how it can be utilised to your advantage.
What is Open Banking?
Open Banking is a pioneering system that allows financial institutions to share your financial information with selected third parties.
Put simply, it allows lenders to have a clear and representative picture of your current financial circumstances, without having to rely solely on your credit score when deciding your suitability for credit. Contrary to popular belief, Open Banking benefits you as a customer and the financial institutions that serve you.
Do I need to give my consent to participate in Open Banking?
One of the key aspects of Open Banking is that you must actively opt-in to participate. Banks and other financial institutions are not permitted to share your financial details without your prior approval, putting you firmly in control.
As such, you don’t have to participate in Open Banking if you don’t want to, while the big banks in the UK (Santander, HSBC, Barclays, etc.) are all obliged to offer their customers the option of opting in.
Is Open Banking safe?
Something that customers are understandably concerned about is the safety of Open Banking. After all, is sharing your financial information with third parties really a good idea? The fact of the matter is that Open Banking is incredibly safe.
Open Banking is regulated by the Financial Conduct Authority, and the providers that are approved to access your data must adhere to strict data protection rules. If something does occur, you can contact a financial ombudsman to assist you with any claims. Therefore, you don’t need to worry about data breaches when it comes to sharing your financial details. Open Banking is all about putting you in control and helping you, as we explore below.
How does Open Banking help me?
Open Banking has the potential to help customers like you in myriad ways. Firstly, when you’re applying for a loan or credit, lenders like Koyo Loans can access your financial information and get a clear and representative picture of your current situation, helping us make more informed decisions about your eligibility.
Another benefit of Open Banking is that it may open doors to new financial products and services that you may not have had access to in the past. It also puts you in total control of how your financial information is shared and managed, as you can opt-in or out at any time. In other words, Open Banking can help you in many ways.
Will Open Banking help my loan application?
Opting in to Open Banking certainly has the potential to help your loan application. This is because lenders can access information regarding your current finances and aren’t reliant solely on credit scores, as was traditionally the case.
Lenders can use Open Banking to access real-time financial information, including your expenditure and monthly outgoings, which provides a much more accurate picture of your eligibility for a loan and your likelihood of making the required repayments. Ultimately, it allows lenders to make a more informed decision, which certainly doesn’t do your approval chances any harm.
At Koyo Loans, we use Open Banking through a provider called TrueLayer, which helps us fairly assess your eligibility for a loan. We offer unsecured personal loans of between £1,500 and £12,000 that can be used for various purposes, and you can use our loan calculator to see how much you could borrow today. 24.9% APR Representative.