Open Banking and How it Works
The UK Government is constantly on the lookout for means that help financial service providers offer new products, services, and a greater variety of choice to their customers. One of the proposals believed to improve competition and choice is Open Banking.
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What is open banking?
Open banking is an amelioration on how banks deal with your financial information through ‘the second Payment Services Directive’ regulation. To put it simply, as long as you give your permission, all UK-regulated banks will have to securely share financial data such as your spending habits with authorised providers. This includes challenger banks, fintech firms, tech companies and credit reference agencies.
The idea behind these changes is that by opening up data to third party apps, customers will be able to have access to and compare different products suited to their financial needs. It will increase competition and innovation within financial services, which in turn will lead to an increase of better quality services aimed at helping customers manage their money.Example, when one connects their bank account to an app using open banking, it could analyse their spending habits and recommend a new product to help them save their money. It could also offer to help them sign up to a provider that displays all of their accounts with multiple banks so they can have a better overview of their finances.
How does open banking really work?
Open banking transpires through an integration technology called application programming interfaces (API). These APIs make it possible for banks to share current account holder data in a more secure way. Before banks started using open banking, aggregation sites were used to scrape data by requiring users to hand over their usernames and passwords. This practice has security risks and sometimes has compatibility issues preventing users to see their real time finances. With APIs, applications can directly share data without sharing account credentials.
But, how safe is Open Banking?
As long as you have authorised it, third party providers can access your data. So, if you’ve authorised one to look at your current debit account with a particular bank, it wouldn’t be able to access your credit card account information with that bank unless you have given permission.There are two types of services that authorised third party providers can offer you under open banking which need to have different authorisation.
These are:
Account information services, which allows you to see all your account information from different banks in one place. It also provides budgeting tips and product recommendations.Payment initiation services, which allows you to pay directly from your bank account.
You don’t have to worry about the safety and security of your account information. Authorised providers have to comply with data protection rules including the GDPR. If you’re hesitant, you can ask your provider for more information before you provide access. If you feel something is not right, you can always opt not to share your information.
So, how can Tappo help small businesses?
Due to the coronavirus pandemic, some small businesses are in crisis. They have been affected by changed customer behaviour including social distancing and mandated operational procedures. Luckily, Tappo is here. Did you know that Tappo is one of the few companies that supports rebuilding local businesses?
Yes, here’s how Tappo can help:
By Creating new business opportunities. We provide great efficiency with the help of our in-depth analytics and marketing tool. You can now easily monitor your business and marketing campaigns.By Expanding your network. We offer an e-commerce platform that helps businesses offer their products and services to more customers.Lowest rates. Among all platforms, we charge the lowest, at only 0.5% per transaction and capped at 5p. Most platforms charge as much as 40%.
With Tappo, businesses will be able to save money and receive support with online accounting, fraud detection, and account verification issues. Tappo is set to have a huge impact in the competitive landscape of financial services.
So, are you ready to make that shift to open banking with Tappo?
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