Landlords often ask us about Open Banking and how we use it to help our customers at Hammock. We wrote this article to give anyone wondering about this a firm handle on what is Open Banking and how it is used on Hammock’s platform.
Open Banking is an easy and secure way to share your financial information with authorised providers. In this digital age, it’s easier than ever to manage our money. Budgeting apps, investment apps and platforms like Hammock are changing the way we save and invest.
Consumers have been able to share bank account data with third-party apps for some time.
The big change introduced with Open Baking and its uses was to ensure that they have protection as they share it with authorised providers.
When was Open Banking introduced in the UK?
The Open Banking reforms were introduced on 13th January 2018 and they redefined the way banks deal with your financial information. The competition watchdog, the Competition and Markets Authority (CMA) that overlooks fair competition within the sector, called for these reforms.
The not so memorably named the second Payment Services Directive (PSD2) is a regulation brought in alongside that “sets requirements for firms that provide payment services and will affect banks and building societies, payment institutions, e-money institutions and their customers. As well as promoting innovation, PSD2 aims to improve consumer protection, make payments safer and more secure, and drive down the costs of payment services”
Which UK banks support Open Banking?
The nine largest banks and building societies in the UK must allow you to share your financial data, as long as you give your permission. Other banks and institutions can choose to adhere to Open Banking but are not obliged to do so.
Your financial data is your bank, credit card or savings accounts and investments that your banks hold for you. This allows authorised providers that are not owned by your bank to securely offer you financial management services.
Why were these changes brought in?
The general consensus was that banking was somewhat monopolised by traditional big banks.
Once upon a time, if we wanted advice on how to manage, save and invest our money we’d go to our bank. Recently, independent technology not owned by banks has jumped ahead, offering more innovative solutions for managing our money.
Open Banking was designed to bring more competition and innovation to financial services, whilst keeping users protected. It was set up by the Competition and Markets Authority on behalf of the UK Government. It allows you to securely share your financial information with companies like Hammock in order to make your life easier.
Open Banking uses
- Flexibility. You can make the most of cutting edge technology that your bank doesn’t offer. Your financial information is kept secure and you enjoy unprecedented flexibility in managing your finances through authorised providers.
- Increased options. With third-party apps, you’re able to do all kinds of things. From tracking your spending, aggregating your accounts to give you a better overview of your finances, analysing your shopping habits and making micro-investments.
- Streamlined lending. If you need a personal or business loan, you no longer have to submit the information manually. You can allow lenders to securely access the relevant data directly from your bank, credit card issuer and accounting system.
- Real-time monitoring. Third-party apps can help you save money or spot fraud by providing higher visibility over your accounts in real-time. Using AI and crowdsourced information, they can highlight unnecessary recurring charges and strange activity.
- Time-saving. By using third-party apps like Hammock to get automated updates on specific transactions, you save time browsing through statements to check everything manually.
- Easier accounting. You can benefit from easier bookkeeping. With all your income and expenses in one place, preparing your tax return can be far easier.
Open Banking apps
Apps helping individuals, as well as SME’s, are now ubiquitous and many of them use Open Banking to connect to their users’ bank accounts and get an overview of their finances to power their services. Here are just some examples for you:
- Snoop: a money-saving app that helps you switch providers to get the best value for money with your bills. Snoop uses Open Banking to monitor your spending habits and the charges you incur, so it can formulate tailor-made recommendations to you;
- Chip: a money-saving app, focused on making savings automatic for users. Chip uses Artificial Intelligence to examine personal finances patterns and set the ideal level of savings on a recurring basis. Open Banking is what enables them to have access to their users transactions;
- FreeAgent: accounting software for small businesses. For both business owners who take things in their own hands or those who work with an accountant, FreeAgent takes care of all the business admin in one place. Open Banking allows a real-time synchronisation of all transactions, with no need for manual entry.
Is Open Banking safe?
Your finances are still private, and you don’t have to share any of your financial data if you don’t want to. It’s totally your choice. Your bank will only share this information if you expressly give permission to a new provider. No one can randomly poke around in your accounts.
Hammock or any other third-party providers you sign up for, must ask for your consent if their service requires you to share financial information. If you give your consent a request will be submitted to your bank. Your bank will process this request and share the details. You can withdraw your permission at any time.
If you do decide to share your financial information with a trusted provider, they will be bound by strict regulations that protect your data.
How Hammock uses Open Banking
We incorporate secure Open Banking into our platform in order to help landlords track and manage their finances. We’re introducing a Hammock current account soon, but you don’t have to wait. By linking your current bank account you are already able to monitor rent collection, track payments and expenses and maximise your profits. How?
- Automatically track both incoming and outgoing transactions on one easy to use dashboard. No more paper or spreadsheets! Everything from rental income, mortgage payments, insurance premiums or even your latest IKEA trip.
- Receive notifications when tenants make payments (and tenants will be reminded if rent is overdue).
- Easily calculate annual tax statements with all your financial information in one place.
Security is of paramount importance to us, and we take the safety of your financial data very seriously.
- We connect your account using Truelayer, our Open Banking provider. Truelayer is regulated and authorised by the Financial Conduct Authority (FCA Register No. 793171).
- We have read-only access to your data, no payments can be initiated from your Hammock account via Open Banking.
- With Open Banking, you’re never asked to share your password or login details with anyone other than your own bank or building society. Hammock does not store (or have access to) this information.
- Your user credentials and login details are encrypted with a uniquely generated key, enciphered with AES-256. The encryption key is embedded in the access token sent to the application and never stored by TrueLayer or Hammock.
If you would like to learn more about our security processes or have any further questions please contact us: [email protected]
To find out more about Hammock, the first account designed by landlords for landlords, sign up for a free trial.