Traditionally Banks have argued that any customer data belonged to them and access was given to that data only to customers. This changed in 2016 with the advent of regulations like PSD2 (Payment Services Directive 2) which is part of the larger Open Banking reforms. It was emphasized that customers need to have the control on their data and should be able to share it with any regulated third parties for their own benefit. What began as an initiative to bring more competition and innovation to the financial services industry has caught on since its official launch in 2018. This was made easier by defining industry wide technology standards and formats to share financial data via API’s. It has since gained widespread adoption across the UK and EU and now regulators across the globe including India, Australia, Hong Kong and many more are considering or have started implementing similar regulations.
So what exactly is Open Banking and more specifically PSD2
In simple terms it means customers can now have more control on their financial data and can provide consent to share their financial data with a regulated third party.
To explain further – The PSD2 guidelines mandate Banks in the UK and EU to allow customers to provide consent to share their financial data (bank account & credit card transactions for now) with regulated companies (via standardised and secure interfaces).
As per the Open Banking/PSD2 guidelines in the UK, regulated entities – like Fintify (Qbroot Financial Solutions) which have a license as an RAISP (Registered Account Information Service Provider) from the FCA (Financial Conduct Authority) can access Bank data directly from the Bank via a secure API. With Open Banking API’s users just need to provide a consent to share their information with regulated third party platforms like Fintify and get seamless secure access to their data with value added benefits of a single aggregated dashboard view and help them to:
- Save more with in-depth analytics on expense categorizations, credit card usage and budgeting
- Get access to loans easily (faster credit checks based on transaction data)
- Compare utilities and banking products across different providers /banks and select the one most suited to their needs.
What are API’s
API or Application Programming Interface is a popular technology standard which allows one system to communicate with another using a simple request/response approach in a pre-defined format. API based data access is now widely adopted across the globe and is the basis of the Open API revolution powering simpler, standardised interfaces for hitherto complex connections. This communication is highly secure as it uses security certificates (similar to very complex passwords) to authenticate the request and the response is provided for a very specific data item.
Here are some common questions users might have:
How does Fintify access Open Banking data
- Once a user initiates Open banking account linking on Fintify, a request is sent from Fintify to the Bank’s server.
- The Bank first authenticates Fintify’s request using the pre-defined security protocols (encrypted security certificates)
- The user is taken to the Bank’s secure site where the user registers consent to share her data for specific account/s and provides the period of validity of the consent.
- Once the consent is registered, the Bank shares a security token with Fintify which is used by Fintify to access the users’ transaction data for a specific past period (1 year in most cases)
- Post this Fintify can seamlessly access any incremental transactions on a daily basis from the Bank till the period of validity of the consent (90 days)
How do I know if my Bank has moved to Open Banking
If your Bank has moved to Open Banking, you will see a red icon next to your account which will alert you to provide a one time consent to your Bank.
Simply go to the Sync Account option in the account menu and select Edit Account and follow the consent process as explained above.
What about non-Open Banking enabled Banks/Financial institutions
Users will be able to access their non Open Banking accounts in the UK and globally as earlier using the credential based data access process. There will not be any change in the process for such accounts.
If you have any further questions related to Open Banking on Fintify please get in touch with us at firstname.lastname@example.org