Regulations like the PSD2 in Europe will force banks to provide access to customers’ accounts to third party providers. The purpose is to allow companies from within or outside the financial sector to create better financial services for customers.
For example, customers could shop online and, at the same time, see their bank balance, and purchase products without having to enter their account information.
A big concern for consumers, however, is the way in which third-party providers will use their account information. Many fear that fintechs to do not have the same security in place as banks. PSD2 aims to solve this issue by using “screen scraping” – a method through which a consumer hands authentication information to third-party companies which can log in an access their financial information.
A similar initiative called Open Banking has also been launched in the UK, but Open Banking will not require customers to provide log-in details.
According to the Financial Times, “the data are transferred using a “plug-and-socket” approach, whereby companies connect directly to the bank to access the data. They can only see specific information relevant to the service that the customer has consented to, such as their current account balance.”
The nine largest banks in the UK current account market must comply with Open Banking by early 2018. Initially, it will only apply to current accounts, although Mr Hammond said the regulation would cover all payment account types, from credit cards to e-wallets.
HSBC plans to launch an “aggregator” app in 2018, which is designed to show customers’ accounts — including those with rival banks — in one place, while offering tools to categorise spending and meet savings goals.”
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