Banking revolution 'will help guide people to better deals'
A banking revolution starts on Saturday, which aims to give people more control to make better decisions with their money.
Open banking is being launched following a probe by the Competition and Markets Authority (CMA), which found that many banking customers are paying more than they should and are not benefiting from new services.
Under the initiative, people will be able to give companies other than their bank or building society permission to securely access their accounts.
The idea is that doing this should make it easier for people to compare products, based on their own needs, which could in turn shake up competition and encourage firms to up their game.
It will take some time for the full effects of open banking to be seen.
In the coming years, as new products are developed, it could become more of "the norm" for people to use a website or app to find the best financial deals for their needs, based on their actual money habits, without handing over their bank log-in details.
Imran Gulamhuseinwala, trustee of open banking, said: "It is difficult to overstate just how revolutionary open banking could, and should, be.
"New products will emerge from incumbents and entirely new entrants will join the market.
"New ways of managing money, of making life-changing financial decisions, of paying for things, will appear."
It is thought that as well as making it easier for people to select suitable products, open banking could also aid people with budgeting and help lenders make more accurate decisions based on people's financial behaviour.
The initiative is an "opt-in" system, so people's details will not be automatically shared - they will need to give their permission for this to happen and companies will only be able to use it for a specified purpose and time period.
Only firms which are regulated and registered on a directory will be allowed to take part in open banking.
Helen Saxon, chief money analyst at MoneySavingExpert.com, said the launch of open banking was just the start, adding: "There are a lot of unknowns and likely many benefits we don't yet know of."
She also said that it would be up to consumers whether or not they wanted to share their data, adding: "The most important thing about open banking is that it's just something you can do - no-one will force you to share your data."
She said: "Open banking will affect consumers as much or as little as each person wants it to.
"You'll now be able to share data on your banking transactions, the idea being that if companies know what you're spending on, say, energy or broadband, they'll be able to analyse the data, and guide you to better deals or better ways you can use your money.
"There are also companies that can use your banking data to help you save - analysing your spending to see how much you can spare each week, then automatically saving it for you."
Ms Saxon also cautioned that people should be aware that some third parties finding new deals may not necessarily search the whole market.
She said: "They may find you an energy deal that saves you money, but there's no guarantee they've searched the whole of the energy market to find the cheapest tariff.
"They may just offer deals from companies who pay them for new business."
Nine banks or building societies are initially taking part in open banking, although some of these have been granted extended deadlines of varying lengths, mostly a few weeks, to get everything in place.
The nine are Barclays, Lloyds Banking Group, Santander, Danske, HSBC, RBS, Bank of Ireland, Nationwide and Allied Irish Bank.
John Lyons, head of retail and commercial banking at PwC said: "Open banking is set to drive a major change in the banking landscape.
"As regulators take action to further develop competition, the future market will be increasingly varied, resulting in a very different banking experience for customers."
Gareth Shaw, money expert at Which?, said: "Open banking has the potential to offer consumers more control of their finances and boost choice but it also comes with potential risks around data privacy and security.
"Regulators and industry must ensure that customers are properly protected from data breaches and scams, which is vital if consumers are to use these services with confidence and trust."
As with all money matters, people using open banking are advised to make sure they know who they are dealing with when it comes to firms.
Regulated firms are listed on the Financial Conduct Authority's website - www.fca.org.uk/firms/financial-services-register.