What is open banking?

Dafferns Wealth

It’s a term we’ve heard a lot recently, so let’s take a close look at what open banking actually is, and how many people know about it.

Open banking means allowing third-party financial services providers, such as budgeting apps, to access a person’s banking information, like their payment history and previous transactions.

These services have proved to be a lifeline for many of us, as they’ve made managing budgets much easier and given consumers greater visibility over how much money is coming in and how it’s spent.

As the cost of living crisis bites, there are definite advantages to giving individuals the tools they need to better manage their finances. But interestingly, a survey by Yapily found that 52 per cent of the general population have never heard of open banking.

That’s a worry, given people’s current fears about the economic climate. In the same survey, the open banking platform found that 95 per cent of us are either somewhat or very concerned about the cost of living crisis.

These worries have prompted 66 per cent of consumers to use financial products and services over the last year to supplement their income, such as credit cards, buy now, pay later schemes and overdrafts.

A separate study by another open banking network, Plaid, yielded similar results, finding that 62 per cent of consumers feel more stressed about money than they did last year, while the number of people feeling confident in their relationship with money has fallen from 77 per cent to 61 per cent.

Open banking services, from budgeting apps to financial dashboards, could be very helpful to many individuals in this climate. But it’s clear that more possibly needs to be done to raise awareness of the tools that are out there, and the advantages they can offer.

Giving people these resources means they’re in a better position to understand their spending, manage their money and ultimately feel much more in control of their finances.

That, in turn, gives people greater peace of mind day to day, and puts them in a stronger position to achieve both their financial and wider lifestyle goals.

Open banking services can be even more effective when used in tandem with face-to-face financial advice from a professional, regulated expert in this field.

If you have any questions about how to better manage your money, and what tools can help you achieve your financial ambitions, please don’t hesitate to get in touch with us. We’re always happy to speak to you.