Introduction to Open Banking
Open Banking was initiated in 2017 by the Competition and Markets Authority (CMA) following its market investigation into retail banking. The open banking regime enables trusted third parties to securely access banking and transaction data of individuals and small and medium-sized enterprises (SMEs).
According to the data provided in January 2022 by the banks and building societies mandated under the Competition and Markets Authority (CMA) order to implement open banking in the UK, the number of people actively using open banking in the UK has reached five million.
Regulators announce next steps on future oversight of Open Banking
At Amiqus, we use open banking technology in our Source of Funds check, also called Banking Information check. It enables you to securely verify your clients’ source of funds in a matter of minutes, by returning balances, transactions, payees, income and affordability data that can be digitally filtered, searched and exported to instantly highlight the key information that you need.
The most common concern you and your clients may have is whether open banking is secure. Open Banking actually provides more security than other methods of sharing financial information such as screenshots of bank statements. It is regulated by the Financial Conduct Authority and therefore has to meet the same rigorous data security standards of banks and other financial institutions.
Many firms tend to ask clients to send in their documents like bank statements via email, which comes with enormous risk of data breach. Following are some statistics that prove the same:
- 4500 successful attempts to hack small to medium sized businesses every day in the UK (Source: Hiscox/cyberlive)
- 91% of cyber attacks start with an email (Source: Barracuda spear phishing report 2020)
- And 83% of all data breaches are caused by using the wrong email address. (Source: Egress study March ‘21)
It has been estimated that by September 2023, 60% of the UK population will be using Open Banking services. As its user base continues to rise, the CMA launched a public consultation on the future oversight of Open Banking and published its recommendations in March, which includes setting up a new entity to implement open banking.
The new entity will have effective regulatory sight, with a new committee led jointly by the Financial Conduct Authority (FCA) and Payment Systems Regulator (PSR), to consider the entity’s vision, governance and priorities.
Open banking is highly regulated and is being developed further. Therefore, businesses can confidently carry out source of funds (banking information) checks on their clients and reassure them about the credibility of the open banking technology.
Benefits of using open banking in Source of Funds (Banking Information) check
- Convenience - Since obtaining banking information by using open banking is easier and more secure for both you and your client, this is a much better alternative to:
- Chasing clients for bank statements
- Dealing with poorly cropped screenshots
- Finding out at a later stage that your client has not provided complete information
- Gain the information you need in a secure way
- Reduce any extra admin while keeping everything in one place for reviewing
Want to find out more about how our Banking Information check (which uses open banking technology) can help your business reduce its administrative burden, stay compliant and provide the best service to your clients? Get in touch with our support team at email@example.com