Yahoo Finance Government's banking revolution 'could be derailed by data security fears'
The Government’s flagship policy to make banking simpler could be derailed because customers fear sharing their data, a major regulator has said.
The Open Banking scheme requires financial institutions to open up their customer’s information to other companies and organisations. The idea is that this will make it easier to switch accounts, leading to better deals for consumers. A customer must give their permission for data to be shared and can determine what it is used for.
However, the public’s perception of data sharing is at an all-time low after a series of high profile data breaches, most recently those affecting Dixons Carphone and the fiasco at TSB. Research from BullGuard, a cybersecurity company, found 72pc of British people fear the loss of personal data from a computer hack.
The Payments Systems Regulator (PSR) has now warned these fears could threaten the success of the Open Banking project, as there is a risk consumers will simply choose to opt out of data sharing.
The regulator suggested that if consumers choose not to give companies access to their data, the potential benefits of Open Banking could be outweighed.
The report said: “We recognise that some end-users may be reluctant to share data with overlay service providers if they have concerns that their data may not be treated appropriately.
“This could have the effect of restricting the potential benefits that some end-users may derive through, for example, newer and more innovative payment services.”
Open Banking is supposed to give consumers more control over their data, as they will be able to choose what companies hold their information and what they are allowed to do with it.
Proponents of the change argue it will make it easier to switch bank accounts, energy providers and other services, ultimately leading to savings.
While Britain’s biggest banks were slow to embrace the change, with six of the biggest nine missing January’s deadline to comply, HSBC has now become the first to launch an app called Connected Money to take advantage of the new software.
Other Open Banking-enabled apps such as Yolt and Moneyhub use the same technology to allow consumers to manage all their accounts in one place.
A spokesman for Open Banking said customers would have more “secure and convenient” control of their data but that caution was understandable.
She added: “We all have to become more sensitive to how our data is used. At Open Banking, we believe that we have created a system that should allay most concerns and that the security and reliability of Open Banking will overtake any lingering concerns.
“Open Banking will be contributing fulsomely to the PSR discussion paper.”
