Personal privacy is an important issue for families and individuals operating in the information age. While the temptation to share personal details is strong and technology now makes it easier than ever to transmit personal data, a cautious approach protects facts and figures, ensuring your vital information remains private.
From an early age we’re taught to protect ourselves from the unfamiliar, so most of us have a built-in sense for self-preservation. But the nature of modern communication can make it difficult to stay atop security concerns. Online banking and other automated financial services, for instance, offer greater convenience than in-person alternatives do. But using electronic financial tools can put the security and privacy of your personal data at risk. We’ve all heard stories about stolen identities and large-scale data breaches suffered by major retailers.
A change to the way consumer information is shared by banks has some observers wondering: Are we making it even harder for UK consumers to protect their financial privacy?
Easier to Share
Personal information you share directly with banks and other lenders is typically used to help test your creditworthiness. The legitimate process looks at your past credit relationships and success repaying debt. This personal credit profile, presented each time you apply for loans, mortgages, credit cards, and other types of financing is an essential piece of your financial puzzle, giving creditors the tools they need to make prudent consumer credit decisions. Even when shopping for loans without formal credit check requirements, you should expect to share basic financial information about yourself and family.
Historically, information shared between you and your bank was confidential between the two parties. A new move impacting credit relationships puts the longstanding tradition in the rear view, changing the way your personal financial information is handled. Under the new guidelines, these closely held secrets are no longer strictly reserved for you and your bank. Instead, your personal data can be shared between firms. Your permission is all that’s necessary to enable the unprecedented sharing between banks.
Customers from some of the UK’s biggest banks have been notified their information can now be shared with other firms. According to advocates of the plan, the portability of information will give consumers greater access to financial products – saving families money at the same time.
The principles of open banking acknowledge the value of consumer data. Your spending and banking habits tell a story that can be used to tailor goods and services to your personal needs. This form of direct custom marketing translates into big-business for financial services providers, enabling them to tap their existing customer base for further profits.
Until recently, banks held exclusive access to your personal financial data’s value, giving them an advantage when promoting products and finding new ways to sell you things. Under the new open banking guidelines you’re encouraged to grant permission for other providers to look at the same data currently held by your bank, giving other firms a chance to compete for your business. Optimists see unlimited possibilities for savings and efficiency, as various firms work for your business.
Detractors point to the vulnerabilities of sharing data through an open banking system. It is feared information could too easily slip beyond our control, taking on a life of its own. New EU regulations require building societies, banks and other financial providers to have mechanisms in place for easily sharing consumer data. Several of the largest current account providers are on a fast track to have secure systems up and running by the early part of the new year.
The financial institutions involved are regulated, so their top tier security extends to cover open banking. But it is thought consumers could be readily exploited by such a system, resulting in a barrage of marketing pressure and potential for fraud and security breaches.
Whether or not you are ready to sign-over some of your personal privacy for better deals on mortgages and overdrafts is a decision you may face sooner than you thought, as new EU requirements push data sharing to the next level. With your permission, vital information can quickly be shared between firms, but are we creating another layer of security risk for the sake of convenience and competition?