Open Banking literally has the power to revolutionise the way we manage and use money. Here we will look more closely at what Open Banking is. We will look at how Open Banking can save landlords time and money and help you be much more efficient.
What exactly is Open Banking?
With traditional banking every bank account operates in isolation. Yes, your account can send and receive payments digitally to and from other accounts. But there is not much in the way of functionality between other accounts or financial products you might have.
Open Banking recognises that many people, and especially businesses, often have several bank accounts and many financial products and with different providers. Open Banking allows these to share information with each other efficiently – but with your consent and subject to strict security measures.
Open Banking is the free movement of financial data but it is more than that too. It also allows third party developers to access and use your financial data to offer new and innovative financial services and products.
The benefits of Open Banking for landlords
Open Banking has the potential to save everyone time, money and hassle and make them financially more astute.
Self-managing landlords in particular handle a lot of financial data on a regular basis. Everything from rent payments to mortgage payments and repair costs. So they could potentially have a lot more to gain from using Open Banking than most.
Here are just some of the main benefits Open Banking could offer landlords:
See all your financial information from different accounts all in one place on one website or app.
Get valuable insights about your income, expenditure and overall financial position all in one place. You can receive alerts and notifications. You can set goals and targets.
Pay, receive and transfer money more simply and cheaply than current methods such as bank transfers and credit/debit cards.
Share selected financial information freely with third parties and they can also share it with you. This can save time and work in manually transferring data from place to place, using spreadsheets or even paper forms etc. It can help you be more accurate and avoid errors. You and those you work with can use this information to have a more productive working relationship.
By providing financial services providers with direct access to your financial information using Open Banking they should be able to offer you financial products that are better tailored to your needs.
You can automate routine (and tedious) financial accounting work. For example, with Open Banking you can pull in rent and expense payments from your bank account without having to go through bank statements or paperwork and enter data manually. You can easily collect the information you need for your accounts, financial analysis of your portfolio and for tax purposes.
You can take advantage of innovative new financial products and services not possible before.
For example, some referencing services now use Open Banking. They make use of a prospective tenant’s bank account information to get a picture of their actual income and spending and so improve accuracy. Open Banking has the potential to allow lenders access to your financial information and so provide you with mortgages that are best suited to your needs, as well as speeding up the application process.
Open Banking is still relatively new, only having been possible since 2018, so new products and services are still very much in their infancy. It’s likely many more new products and services which utilise Open Banking will become available over the next few years.
Is Open Banking safe?
Making use of Open Banking does not involve giving up control of your financial accounts, passwords nor your financial information without limit. You are able to choose what data you wish to share and with whom and revoke third party access to your information at any time. Open Banking is subject to safeguards which those who provide services using it must abide by.
How Open Banking will help with Making Tax Digital
Open Banking should make the upcoming Making Tax Digital system easier for landlords to adopt and operate.
Making Tax Digital or MTD will be mandatory from April 2024. It means you will need to submit quarterly financial updates as well as an annual statement digitally to HMRC. A key principle of MTD is that the figures submitted will need to have an audit trail back to each source of income or expense.
Open Banking will mean that all the information you need together with an associated audit trail can be gathered automatically from your bank account. So Open Banking will potentially be a huge time and money saver when this new system comes into operation.
PaTMa and Open Banking for landlords
PaTMa Property Manager is a complete system for managing your rental properties. It can help you manage tenancies, manage maintenance, manage your finances and accounts and prepare the information you need for your tax return.
The aim of PaTMa Property Manager is to save landlords time, money and make them more efficient. PaTMa is already making use of Open Banking to provide these benefits to users.
Already PaTMa’s Open Banking integration means you can record rents in a couple of clicks with no data entry. Expenses are also much faster to record. In the future PaTMa will start detecting rent payments automatically and pro-actively notifying you that a tenant has paid. You won’t even need to check your bank account!
In an upcoming article, we will look at how to get started using and benefitting from Open Banking yourself.