How open banking keeps your data safe

In today’s digital world, convenience is important. That’s exactly what Open Banking offers. It lets you securely share your financial information with trusted and regulated providers, making tasks like applying for a loan easier and quicker.

However, convenience often raises questions and concerns about safety, security, and privacy.

Understanding open banking

Open Banking allows you to securely share financial data directly with approved and regulated lenders. Opting in to open banking provides lenders with up to date transaction history and enables them to make better informed loan decisions. This can speed up the application process and reduce an applicant’s waiting time from days to potentially hours.

How open banking keeps data safe

Here’s how Open Banking keeps your shared data safe and secure:

Your login details are not shared

When you use an Open Banking service, your bank keeps your username and password to itself — it doesn’t share them. Instead, it sends a special, one-time code (called a token) to the service you’re using. This token only works for that specific transaction and can’t be reused. So, your login details stay private and aren’t seen or stored by anyone else including NestEgg or a lender. It’s like handing over a single-use key that keeps your banking information safe and secure.

UK open banking standards

These standards are some of the most regulated systems in the world, putting customer privacy and data security first. They achieve this through:

• Strong Customer Authentication: This security feature requires users to verify their identity through multiple factors, such as a password, a code sent to their phone, or biometric data like fingerprints. This process ensures that only authorised users can initiate a connection with an open banking provider.
• Data Encryption: Open banking providers use bank-grade encryption to protect your data. Encryption scrambles your data into a secure format that only authorised users can read, protecting it even in the rare event of interception.

Regular audits and compliance checks

The UK’s Financial Conduct Authority (FCA) and the Open Banking Implementation Entity (OBIE) set strict standards that providers are required to follow. These standards protect customer data and ensure providers meet regulatory requirements.

Credit unions are embracing open banking

Credit unions have long been champions of ethical, community-focused financial services. By adopting Open Banking, credit unions are bringing members modern financial tools without compromising their commitment to privacy and security.

With open banking, your credit union can securely access financial data to offer services like personalised loan rates, budgeting assistance, and tailored savings options – all without storing or accessing your personal bank login details. This means faster responses and less paperwork, and maintains security, letting you benefit from your credit union’s offerings without worrying about data privacy.

Trusting open banking with your data

Understandably, there might be some concerns about safety and privacy when sharing financial information. Open Banking prioritises security. Using advanced tools like strong encryption, secure tokens, and strict regulations to help keep your data safe. Most importantly, you maintain full control over what data to share. You have the flexibility to revoke access at any time (through your bank).

No matter how safe Open Banking is, staying vigilant is crucial, as phishing attempts can still target you. Moreover, being aware of potential risks such as suspicious text messages, emails and web addresses ensures you can take proactive steps to protect your information. Only share data with authorised and regulated third parties.

Open banking reduces paperwork, is safe and speeds up loan decisions. The lenders on NestEgg’s comparison site use open banking to make faster and fairer decisions. Connecting Open Banking will more than double the speed at which you will receive a loan decision.