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Open Banking: Why it's important for small businesses

Open Banking is due to be rolled out next year - but what is it and how will it benefits SMEs?

Open Banking refers to a system that provides a user with a network of data from financial institutions through API’s. It’s new to the financial industry and was built to help customers share their financial information safely with a range of financial service providers – this allows for a more tailored banking experience.*

The rollout of Open Banking will happen in two stages:

  1. This stage began in March this year and focused on extracting and publishing data on cash machines, branches, personal accounts, business current accounts and unsecured lending and credits cards.
  2. Planned for January 2018, with the consent of the customer, business or authorised third parties, you’ll be able to pull statement information and set up payments without having to use banks’ services. Emerging innovators are set to create new services that will enhance customer experiences.

How will Open Banking help small businesses?

In both the UK and wider EU, banks are being instructed to share customer data with financial service providers. Competition and Markets Authority (CMA) have created a system called ‘Open Banking’, which gives small businesses access to personalised and reliable financial advice, and the ability to compare financial products based on your individual profile.

A CMA report into retail banking concluded that the financial market is not competitive enough. It’s being monopolised by the larger banks and as a result, customers are potentially paying more than is needed. That’s why they started the Open Banking initiative – to empower customers to manage aspects of their accounts and financial profile independently of their bank.

What are the incentives for getting involved in Open Banking?

As an incentive to develop Open Banking friendly apps and software for small businesses, Nesta (an innovation foundation) created the Open-Up Challenge. This gives Fintech companies and start-ups the opportunity to win cash prizes for creating innovative and helpful apps and software. “The quantity and quality of the interest we've had in the [Open] Challenge shows just how seriously fintechs are taking open banking,” says Prize lead at Nesta, Chris Gorst.

These prizes are funded by leading banks, such as Lloyds, RBS and Santander. The list of 20 winners features the likes of Handle, Tide and DueDil. As part of the prize, winners will also be given exclusive access to “one of the largest anonymised UK banking transaction datasets ever made available”**, to help test their ideas in a real-world setting, ahead of the launch of Open Banking.

What’s next for Open Banking?

The general consensus is that Open Banking will bring a much-needed revolution to the world of finance and borrowing for businesses and consumers. No longer will lenders have to profile and verify potential customers manually. Open Banking will mean faster online checks, and as a result - accurate and potentially better decisions based on real-time data.


We think Open banking is going to be positive for small and medium businesses and will work to bring it into our service to enhance our customers’ experience.