European Union rules which come into effect in January will lead to greater innovation in fintech, HM Treasury has said.
From January individual consumers will be able give consent to fintech firms to access data from their bank accounts.
The Treasury has predicted this will lead to innovations like managing all bank accounts from one app or providing personalised product recommendations based on how consumers spend their money.
The changes stem from the European Union’s second Payment Services Directive.
Economic Secretary to the Treasury, Stephen Barclay, said: “Thanks to the changes we’re making, new fintech firms can enter the market and offer innovative and transformative banking services that are tailored to meet people’s needs.
“New apps will empower people to take greater control over their finances, whether that’s through managing all of their bank accounts in one place or helping to avoid unauthorised overdrafts when they have money elsewhere.”
The Treasury said giving people the ability to know exactly which products are best for them will also drive competition in the financial services market.
This is because consumers will switch to the best product for them, and this competition will compel firms to provide better products.
Stephen Jones, chief executive of industry lobby body UK Finance, said: “We are excited by the potential for these reforms to enhance competition and innovation in the financial services sector – and welcome the publication of these regulations which mark an important milestone on the journey towards implementing it.
“The changes will allow customers to use details of their payments to help plan and manage their money better.
“What's more, this is just the start. There are a whole host of benefits for customers, many of which we are just beginning to see.”