Why open banking could be a boon for fraudsters

Open banking has arrived and with it a slew of apps aiming to help you to use these new rules to improve your budgeting habits. Just watch out for crooks.

879-duck-634
Banks might duck the blame if you're hacked

Last weekend, new regulations came into force that could dramatically change the way you bank. "Open banking" has arrived and, with it, a slew of apps aiming to help you to use these new rules to improve your budgeting habits.

From now on, banks have to share financial data such as your transaction history and spending patterns with third parties, if you ask them to. "That might sound like baffling small print, but it could genuinely shake up the way in which you manage your money," as Felicity Hannah says in The Independent.

How much can you save?

In practice, this means you could give a third party access to your current-account data, and they could either analyse your spending habits and work out exactly how much you can afford to save each month and move that amount into a savings account automatically or assess how often you go into the red and then recommend a current account that better suits your needs, perhaps one with lower overdraft charges.

The benefit to the companies involved is that they will use this access to try to sell you their products. Open banking could also allow you to keep track of all your money, across different accounts, via one website. But open banking isn't just about sharing your financial data with start-ups. It should also encourage more of us to switch bank accounts, suggests The Daily Telegraph, as you can now share your financial data with your new bank "in minutes".

Someone will have to pay

But it isn't all good news. There are concerns that the new rules could lead to more of us being scammed, with criminals setting up dodgy apps and websites asking for your banking details under the umbrella of open banking.

"I might sound like a Luddite, but I'm worried that letting an app access my data might leave me vulnerable to fraud," says Patrick Collinson in The Guardian. "It's not absolutely clear who is going to cough up when something goes wrong, which, inevitably, it will at some point."

Before open banking, if criminals hacked into your bank account the blame fell on your bank, unless you had been handing out your account details willy-nilly (highly unlikely). As a result, your bank would have to compensate you. But now you could be giving out all your account details to a fintech firm that happens to have developed an app.

"Given that tech companies with vast IT departments, such as Experian, have been successfully hacked, we can assume one of these fintechs will be hacked too," says Collinson. But as you gave that fintech access to your accounts, your bank will "quite reasonably blame the third party". And it's fair to question whether a small start-up tech firm would be able to cover these potential losses.

A tech firm has to be regulated to use open banking, and many are taking out insurance policies to cover themselves in case of a data breach. But most of us remain concerned, according to a survey by Accenture, with two-thirds of those questioned saying they would not share their financial data with a third party.

However, even if you are keen to embrace this new era of banking and budget automation, you may have to wait a while. HSBC, Nationwide, Barclays, RBS, Santander and Bank of Ireland have all requested, and received, an extension to the deadline to comply with open banking. Their customers will now have to wait for weeks or even months before they can start sharing their financial data.

Pocket money how to escape the January blues

Employees are missing out on a "valuable tax perk", according to Ruth Emery in The Sunday Times. Pension advice vouchers are a government initiative similar to childcare vouchers, "but they have gone largely unnoticed", with few companies offering the benefit to workers.

Under the salary-sacrifice scheme, staff can swap up to £500 of their pay each tax year for a pension advice voucher. The voucher can then be used to get financial advice about any sort of pension scheme they have. Depending on the employee's wages, the voucher can cost them as little as £190, thanks to the tax and national insurance saved.

Last Monday was dubbed "Blue Monday" the most depressing day of the year, thanks to the arrival of festive credit-card bills, the failure of New Year's resolutions and the long drag until payday. To cheer us all up, the Financial Times ran a series of money-saving travel tips.

The number-one tip is to "regularly clear the cookies' from your web browser, as this will prevent the site from remembering the holidays, flights and hotel bookings you have previously browsed and often automatically raising the price of those you've looked at before", says Claer Barrett. If you need car hire, book it as far in advance as possible. Also, "make sure the car is big enough it will only cost a few quid more to get a bigger car when booking, but it can be hundreds if you have to upgrade at the check-in desk", suggests the FT.

Watch out for dodgy "trust" schemes that say they can help you to avoid care-home fees, warns Sam Brodbeck in The Daily Telegraph. Average nursing-care fees exceeded £1,000 a week for the first time last year. Combine that with more and more families hoping to avoid inheritance tax (IHT) and you have fertile ground for a dodgy investment scheme.

If you put your house into a trust to try and avoid care-home fees you could be committing fraud, leaving you still having to pay the fees but potentially also facing criminal charges. The new IHT allowance for family homes also means that many people who are contemplating trying to shield their house in some way actually have little chance of ever having to pay IHT.

Recommended

This year’s endless fiasco at NS&I
Personal finance

This year’s endless fiasco at NS&I

National Savings & Investments (NS&I), has lurched from one disaster to another this year. Ruth Jackson-Kirby looks at what's gone wrong.
6 Dec 2020
For the best savings rates you can find now, forget the high street banks
Savings

For the best savings rates you can find now, forget the high street banks

If you're looking for any sort of return from a savings account, forget the high-street, says Ruth Jackson-Kirby. Here's where you'll get the best rat…
20 Nov 2020
Packaged bank accounts: beware these pricey offerings
Bank accounts

Packaged bank accounts: beware these pricey offerings

Do your sums to see if “premium” bank accounts with benefits are worth paying extra for.
3 Nov 2020
Negative interest rates and the end of free bank accounts
Bank accounts

Negative interest rates and the end of free bank accounts

Negative interest rates are likely to mean the introduction of fees for current accounts and other banking products. But that might make the UK bankin…
19 Oct 2020

Most Popular

Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021
Prepare for the end of the epic bubble in US stocks
US stockmarkets

Prepare for the end of the epic bubble in US stocks

US stocks are as expensive as they’ve ever been. How can you prepare your portfolio for a bubble bursting?
18 Jan 2021
The best investment trusts to buy for 2021
Investment trusts

The best investment trusts to buy for 2021

Sectors ranging from emerging markets to student accommodation look poised to do well this year, says David Stevenson, as he picks the best investment…
19 Jan 2021