Credit cards with Open Banking in the UK

Discover which credit card providers offer Open Banking in the UK and how it could help you.

Open Banking is still a relatively new concept, but it has been estimated that by September 2023, 60% of the UK population will be using it. We look at how Open Banking works and how it could impact the credit card market.

What is Open Banking and how does it work?

Open Banking enables third-party financial service providers to securely access your banking, transaction and other financial data from banks and financial institutions.

Consumers have to give permission to the third-party providers before they are able to access their data, which can include bank statements, payment transactions and account features.

Customers can give access to current accounts, savings accounts, e-money accounts and credit cards and they can choose how their information is used and who it’s shared with.

The idea behind Open Banking is to encourage more competition and innovation in the financial services market, giving customers access to better financial products.

With credit cards, Open Banking can enable card providers to assess how creditworthy an applicant is by looking at their finances overall, including spending habits and savings, not just their credit history.

Credit cards with Open Banking in the UK

There aren’t a huge number of credit card providers offering Open Banking in the UK, but this number is expected to grow. Some of the credit card providers that do offer Open Banking:

  • Keebo
  • The Credit Thing
  • Yonder (only available in London)

How will Open Banking impact the credit card market?

Open Banking has the potential to help those who may not have been able to build up a credit history get access to credit. This includes young people who have never borrowed before or those who have recently moved to the UK.

A lack of credit history has traditionally made it difficult to get accepted for a credit card, but Open Banking will enable credit card providers to assess creditworthiness by looking at consumers’ bank accounts and getting an overview of their financial behaviour, rather than solely relying on their credit history.

Some providers, such as Keebo, also state that once you’re accepted for a credit card, your interest rate will be reduced and your credit limit increased as your financial position improves.

Open Banking is also innovative enough to keep track of your finances and warn you if you don’t have enough money in your bank account to meet a monthly payment on your credit card. This will prevent you from missing a payment which could negatively impact your credit score.

Is Open Banking safe?

Financial service providers can only access your data if you have given consent. However, it’s important that you choose a firm that is regulated by the Financial Conduct Authority (FCA) or another European regulator. These firms will be listed on the FCA’s Register and/or the Open Banking Directory.

Regulated providers must only ask for permission to access the information they need to provide the service they’re offering. They must also comply with data protection rules, which means they must tell you exactly what data will be used, how long it will be used for and any actions they might need to take before you agree to sign up.

If something goes wrong, you will only be protected by your bank if you share your data with an authorised firm. If you have any problems, you can go to the free Financial Ombudsman Service.

What are the benefits of Open Banking?

Perhaps the biggest benefit of Open Banking in the credit card market is that it should help those who have struggled to get credit in the past. What’s more, financial products can be specifically tailored to your needs and you may even be able to take advantage of lower interest rates.

It should also give you access to tools and budgeting apps to help you better manage your finances and monitor your spending habits.

What are the downsides of Open Banking?

Even though Open Banking could increase your chances of getting accepted for a credit card, you will still need to complete a credit check as part of your application. This means there’s no guarantee you will get accepted.

Another drawback is the risk of data loss. Even regulated companies are at risk of cyber attacks and consumer group Which? has voiced concerns that Open Banking could lead to a higher number of authorised push payment (APP) scams, where fraudsters trick account holders into making a payment or transfer, often by posing as their bank or the police.

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