What Is Open Banking?

Managing Your Money

Open banking might seem complicated, but it could make tasks like paying bills, budgeting and moving your money between different banks and building societies simpler. 

How does open banking work?

Open banking is a way for you to give permission for other companies to temporarily access your bank account. This could be to view your transactions (known as “read only access”) or to take or send payments. 

It allows you to log in using your online banking username and password without sharing them with the site you’re using. Open banking is designed to be simple to use, especially if you’re using a mobile phone that already has your banking app on it.

It can make payments quicker, because instead of having to leave a site, open your banking app then add a new payee to make a bank transfer, you can log into your bank and make the payment all on the same page. 

Open banking is often used by “fintech” (financial technology) companies, but it's becoming more widespread. Common uses for open banking include:

  • budgeting apps who get read only access to your account so that the app can keep track of your income and spending 
  • paying bills
  • moving your money between accounts from different banks.

You don’t have to use open banking; it’s just one of the ways you can make payments or share information. 

Do all banks use open banking?

Open banking only works if your bank is signed up to use it.  When open banking was launched in the UK in 2017, the FCA asked the six largest banking groups to take part. So, it’s mostly smaller banks that don’t have open banking yet. 

Check if your bank is signed up on this list of banks and building societies that use open banking.

Do HMRC use open banking?

Yes, you can pay your tax bill to HMRC using open banking. However, this is just one way you can choose to pay, you could pay by bank transfer, Direct Debit or with your card instead. 

HMRC can also use open banking to repay any tax you might have overpaid. You can choose to get the money in other ways, but with open banking it can be easier to make sure that your money is going into the correct account.  

Is open banking safe?

With open banking, it’s up to you to give or withdraw your permission for companies to access your account and decide which accounts you want to give access to. 

You can check whether companies asking you to use open banking are on the open banking register. All of the companies on this list are regulated by the Financial Conduct Authority (FCA) or a similar organisation in another European country. 

If a company is on the open banking register, they’ve had to prove that their site or app is secure. There are risks if you open banking, just like when you make any payments online. It’s important to try and reduce the risks by double checking what you’re signing up for.

When you use open banking, you should read the permissions you’re being asked for before you click ‘accept’. If you’re signing up for a budgeting app, it might make sense that you allow the app to see your account activity for a month, but that wouldn’t be appropriate if you were trying to pay a bill. 

If you think you’ve been scammed using open banking, get in touch with your bank. Read more in our blog about getting a refund for bank transfer scams. You could also complain to the Financial Ombudsman Service (FOS) if your bank can’t help you. 

Is open banking legal in the UK?

Open banking has been widely used in the UK since 2018, and it’s regulated by the FCA. Your data is protected by GDPR when you use open banking.

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