Written by Sean Maguinness

Marketing Executive

Since the release of Open Banking in 2015, it’s become integrated into many areas of our financial lives. There are over seven million Open Banking users in the UK alone!

You may already be familiar with the term, as many services now ask you to connect your bank account to make the most of all the features they can provide. 

But what exactly is Open Banking? And how does it work?

We’ll answer these questions and also take a look at ways Open Banking can support you in your day-to-day role, by making the funds application process easier for both you and your students.

What is Open Banking?

Open Banking is a digital option available for the everyday person to take more control over their financial information.

In a nutshell, it’s a type of technology that allows a third party to connect to your financial information (usually from your bank account). But only ever with your consent and only ever in a ‘read-only’ capacity. 

The third party can then see a snapshot of your finances within a certain timeframe, but never edit or make any changes to your information, accounts, data and details. 

In allowing a third party to see your financial data, you can gain a complete picture of your finances and benefit from automating things that you’d otherwise have to do manually, while always remaining in control of your personal information.

Is Open Banking the same as online banking?

No. Both are ‘online’ services, but knowing the difference can be useful in helping you to understand the advantages of Open Banking.

Online banking

Online banking is what it says on the tin – banking that’s online. 

Instead of having to physically go to your local bank branch or a cash point, online banking lets you bank from your phone, tablet or computer instead, including checking your balance and transactions, transferring money to someone else or paying in a cheque. 

It’s still your bank – it’s just digital. 

The bank holds your financial data but they won’t necessarily show you how that data can benefit you.

Example: you pay your electricity and water bills through online banking. You can set up a standing order through your bank and your bank can see this.

Open Banking

Despite also being online, the ‘open’ part of Open Banking refers to the fact that it allows you to share your financial information with a third party – someone other than your bank. 

In doing so, Open Banking can connect your accounts to a third party provider to allow you to have greater control and transparency over your finances than online banking, by letting you integrate information from one financial service with another. 

This makes it easier to take actions across your accounts in real time or to simply get a big picture of your finances quickly, as all your information is visible in one place.  

Example: you give energymarket.com, a third-party provider that compares energy bills, permission to see your account using Open Banking. They can see you have a standing order to pay ‘Energy A’ and ‘Water B’ and, using their own technology, suggest ‘Energy+Water C’ instead, which works out cheaper for you.

How the two work together

Here’s an example of how online banking and Open Banking can work together.

Say you have three separate online bank accounts. You could use Open Banking to see your balance and information relating to each account all in one place. 

This eliminates the need to keep flipping between multiple online banking websites or apps. 

Open Banking is all about giving greater choice and control to people when it comes to their financial information. The real power is in the insight you might gain over your financial life.

Benefits of Open Banking for students

42% of Gen Z say they’re using Open Banking already. Benefits of Open Banking for students include:

1. All accounts in one place

If a student wanted to set up a separate account for their savings, they would either have to apply for an extra savings account with their bank or set up a single account with a new bank entirely. This means having to keep track of money in lots of different places. 

Open Banking enables students to view multiple accounts with multiple providers at once. This can be a fantastic option for a student with multiple savings goals who wants to allocate a budget or ‘pot’ for each one.

Students can also use it to compare accounts they have with different banks to ensure they’re getting the best deal.

2. Faster and more accurate budgeting

Traditionally, if a student wanted to gain insights into their finances, they’d have to gather these themselves e.g. searching through their online statements to see where their money is being spent and saved. 

This is not only time-consuming but also requires effort on behalf of the student, who may be looking for quick answers to immediate money-related questions. 

With Open Banking, a student is able to share their account information from their bank to a third-party provider, who can glean financial insights on their behalf. 

A benefit of this is that it allows automation of the budgeting process; for example, using Open Banking, the third-party provider can use the insights they glean about the student’s spending to suggest areas where they can save money. 

Many students will already be using Open Banking, as certain fintech companies popular with young people – like Monzo, Snoop and Starling – use Open Banking to make their money management solutions more efficient and effective.

3. Access to bank statements and transaction history in real time

In instances such as applying for a loan or submitting an application for a hardship fund, students will need to provide proof of their financial history (whether this is a bank statement or their credit score). 

Without Open Banking, this means going to the effort of downloading PDF statements from their bank account and uploading these (or sometimes even providing paper copies!) alongside the application. 

A student who uses Open Banking to give permission to connect to their bank account can provide this evidence instantly. Once they have opted in (with a few clicks), their transaction history can be pulled in immediately. Again, the third party can view this information but never, but only to read.

Is Open Banking safe?

When it comes to financial details, everyone wants to make sure their information is safe and secure. So “is Open Banking safe?” is a natural question to ask.

Reassuringly, Open Banking platforms have to be approved by the Financial Conduct Authority (FCA) – the same organisation that regulates banks – and abide by stringent safety measures.

Things to know:

  • Open Banking is optional: Before any service connects to your bank account, they have to request your permission and you need to take an action to make it happen. It would never happen automatically – Open Banking can’t be initiated without your explicit say-so. A lot of companies will still provide ways to use their services in case you decline, though it is likely to be a less valuable experience for you.
  • No one else will ever see your banking login details: Open Banking technology is a secure way for a third party to view your financial information. When you go to connect your account, the provider will redirect you to your bank where you will authenticate directly. Any login details stay between you and your bank only – neither the third party nor the Open Banking provider they use will ever see them. 
  • Regular banking still involves someone (your bank!) overseeing your financial information: The difference with Open Banking is that you are able to see, and have more control over, your financial information.

After opting in, you’re still in control:

  • Your financial information is encrypted: Any financial data, including transactions and balances, are stored and encrypted so that only you can access and read that information.
  • Your consent is temporary: Every 90 days, Open Banking providers are required to ask you to re-consent to the sharing of your data. This may be extended in the future to every 6 months or even a year. 
  • You can revoke access at any time: Even if you’ve already connected to Open Banking but, for whatever reason, change your mind, there is always an option to revoke access and disconnect from the third party by deleting your account.

Crucially, with Open Banking, the control of your financial information always remains in your hands.

Using Open Banking to improve the funds application process

We know from our partner universities and colleges that often the biggest pain point – for both staff and students – when it comes to the process of hardship and other funding is the student having to provide evidence of their financial accounts, in the form of bank statements, alongside their application. 

Analysing transactions and identifying other accounts is time-consuming for both staff and students, who also frequently report confusion with the process. Frequently resulting in lots of back-and-forth communication between staff and the student to track down the information that’s needed to support their application.

Open Banking is the obvious answer in solving this challenge, since students can quickly connect their bank account to their application and have their account information pulled in automatically!

It’s for this reason that we’re excited to announce we’ll soon be integrating Open Banking into our Funds Management System (FMS), powered by our Open Banking provider Bud.

Value for students

For a student experiencing financial difficulty, the funds application process can be a stressful process as it is. 

With this in mind, the aim of the FMS has always been to remove as much friction as possible and ensure students can access the funding they need quickly and easily. In some cases – now more than ever, as we saw evidence of in our Student Money & Wellbeing 2023 report – this can be the difference between the student being able to continue their studies or not.

Integrating Open Banking into the FMS is the next, natural step in continuing to make the process even easier and more stress-free for students. 

Where before a student had to upload a PDF bank statement as evidence, now, all they’ll have to do is click ‘connect’. In doing so, allowing Open Banking to automatically pull in 3 months of account information at the click of a button.

Time saved locating transactions and annotating statements

Currently, for many applications students are required to take a considerable amount of time to go through their own statements and make annotations. So that staff can understand the activity within their bank accounts and whether they affect the student’s eligibility, or if there is any cause for concern with risky financial behaviour.

Not only is this incredibly time-consuming for the student, but there’s a time implication for staff as well when statements aren’t annotated correctly – leading to long back-and-forths between staff and student.

I submitted it then I had to do it again because I didn’t annotate it. Submitted 3 times with 3 declines.

Student comment

Open Banking will take the guesswork out for students by locating transactions instantly and automatically, providing the student with a box where they can add any comments if needed. 

From start to finish, the whole process takes 3-5 minutes to connect what before could have consisted of a student spending days trying to find, then download and upload a PDF bank statement. 

We understand some students may still want to go ahead with the manual process, so are keeping this as an option too.

To alleviate any concerns about privacy or safety, when the student clicks through on the Open Banking option, they’ll be given instructions on how Open Banking works and information about how we ensure their financial data is kept secure.

Like all third parties, our access to the student’s bank information is time-limited and once it expires (after 90 days as per the regulations), a student must re-consent to connect their account to access their financial information moving forward. 

If a student wishes to revoke their access before the 90-day expiration period, there is always the option to do this by deleting their account.

Benefits for staff

For any funding application, staff request statements that show a student’s finances over a certain timeframe. Sometimes, the process of obtaining the documentation to assess a student’s eligibility can take a long time. 

Frustrating for me is if they send screenshots of an app rather than bank statements. With an app you can only get a certain amount of transactions. I got 50 lines through, which takes a lot of time to cross-check. Invariably there are questions that come up from there.

Staff comment

Current challenges for staff and how Open Banking can help

  1. Difficulty obtaining the financial information needed from students – with Open Banking, staff using the FMS to manage their funds will no longer need to rely on students to manually provide the right bank statements (also removing pressure on students who are unfamiliar with reviewing their finances and tracking this info down)
  2. Students unable to provide bank statements up to the date of application as their bank does not provide them – Open Banking removes this barrier, pulling up to a year’s worth of transactions from the time of the account connection. Meaning no time limit on the transactions that can be pulled in, presenting staff with an instant snapshot of transactions within the required timeframe. 
  3. Manual, time-consuming analysis – Open Banking significantly reduces the time it takes for staff to analyse students’ financial information by eliminating the need for staff to work through multiple banking documents and PDFs with unclear or long file names, a collection of screenshots or those that are impossible to identify and audit!

The time and capacity staff will be able to claw back by using Open Banking will be dramatic. Whereas previously, manual assessment of evidence would take 40 minutes at a minimum, with Open Banking, this can be cut down to 3-5 minutes. 

By taking advantage of Open Banking within the FMS as a tool to streamline the application process, staff won’t only significantly reduce their own processing times; they’ll also successfully reduce stress and anxiety surrounding the application process for their students too.

Find out more 

If you’re interested in speeding up the process for your hardship and other funds and would like to see the FMS in action, or learn more about how we’ll be using Open Banking, you can:

Learn more about Open Banking generally here.

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