Customers who sign up to 'open banking' revolution where they share details in the hope of better deals 'could be put at risk from fraudsters'
- Current account holders could have personal data be shared with third parties
- To enable firms to tailor deals to them by analysing their spending history
- But experts warn it could leave millions of internet banking customers exposed
The ‘open banking’ revolution that encourages customers to share their details in the hope of better deals on everything from broadband to gas bills puts them at risk from fraudsters, experts warned last night.
From today, current account holders will be able to give permission for their personal data to be shared with third parties.
This will enable firms such as broadband or energy providers to tailor deals to them by analysing their spending history.
The new rules form part of sweeping data sharing reforms, which are supposed to herald a new era of competition.
The ‘open banking’ revolution that encourages customers to share their details in the hope of better deals on everything from broadband to gas bills puts them at risk from fraudsters, experts warned last night
However, a separate piece of legislation, called the Payment Services Directive, allows some companies who want access to a customer’s details to ask for their online username and password.
Major banks are said to have privately voiced concerns to City watchdogs that the reforms could leave millions of internet banking customers exposed.
A senior figure at one of the Big Five banks said: ‘We’re very concerned about scams. In practice customers aren’t going to check if a firm is properly authorised if they have a nice website, and could just hand over their details to fraudsters.’
Under existing banking rules, current account customers are not allowed to share their details with anyone.
Banks are also barred from sharing information about customers’ payments. But with Open Banking, price comparison websites or energy firms could get access to accounts and then directly analyse a consumer’s spending on utilities and offer them better deals.
From today, current account holders will be able to give permission for their personal data to be shared with third parties. This will enable firms such as broadband or energy providers to tailor deals to them by analysing their spending history
The data sharing reforms will revolutionise the business of banks. First Direct and two other UK providers are already developing technology to sell gas, electricity, phone and broadband deals directly to their own customers, in response to the scheme. A spokesman for Open Banking said: ‘Open Banking is designed to give customers even greater protections than they receive today.
‘Only third parties regulated by the FCA can use the open banking system. With Open Banking, you will never be asked to share your password with a third party.’
Questions and Answers
From today, Open Banking will force the UK’s nine largest current account providers to share their customers’ data. Reforms on data-sharing will also allow customers to share their online banking passwords with other firms.
Why has it been brought in?
The aim is to make banks release data in a secure, standardised form so that it can be shared more easily between companies online – promoting greater competition in the financial industry, and getting customers better deals.
Who will be affected?
Only customers with online banking accounts. They will have to give their permission every time a company wants to access their data.
Will it work?
In theory, customers could find a cheaper current account, get lower price energy, or better broadband.
What is the risk?
Critics have dubbed this a fraudster’s charter. Up until now customers were told to never give passwords away. Now they could be tricked in to handing them over to rogue firms.
When is this happening?
The reforms come into effect today but most Open Banking services may not start until March. For now, only current account information can be given to a third party. Over the next 18 months, credit cards, prepaid cards and ewallets will be shared.
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