Open Banking: A big opportunity for small businesses
Rob Burlison, director of corporate affairs at Intuit QuickBooks, explains why UK small businesses should get on board with the Open Banking revolution.
Open Banking, via a combination of EU and UK legislation, was introduced to the UK two years ago, promising a world where individuals and businesses can be in control of their finances from their smartphone via multiple sources.
Bringing a wealth of new services and products, available from a variety of providers, Open Banking was expected to herald a new approach to finance by adding greater competition to the financial market and preventing banks from being the singular source for all financial matters.
Despite the hype around its launch, Open Banking has been dubbed the ‘quiet revolution’ due to low public awareness.
In fact, recent research commissioned by QuickBooks, revealed a startling lack of awareness or knowledge of this banking revolution. Although the majority (69%) of small businesses had heard of the term, almost half (45%) were unable to explain it or did not fully understand what it meant.
What is Open Banking?
Open Banking mandates the UK’s biggest nine banks to share their customer data with regulated third party providers, such as Intuit, through secure application programming interfaces (APIs).
With the permission of customers, these third parties can provide financial products more tailored to their individual needs and allow customers to make better informed financial choices, saving them time and money.
In practice, business customers are able to view bank transactions in tandem with other financial outputs – like invoicing or payroll – allowing them to track their cashflow more accurately, or choose new products and services that can help them make the most of their money.
What can small businesses gain from Open Banking?
1. Better cashflow insights
Small businesses can easily integrate two years’ of bank transactions for richer insights, from overview dashboards to detailed reports.
For example, at QuickBooks we have already started integrating our accounting software with a number of digital banks including Revolut and Monzo to save small business owners time, while promoting accuracy and efficiency in how they digest financial data for bookkeeping.
It also gives businesses the power to see all their finances in one place, keeping on top of their cashflow and building the resilience of their business against unexpected financial shocks.
2. Accurate and real-time data
Open Banking connections are regularly updated throughout the day, making reconciliation easier and giving you complete visibility across your finances.
Offering a wealth of data, Open Banking provides new business insights at the click of a button. Whether a transaction trend that highlights a potential new area of growth – or a way to cut costs by using a cheaper supplier – leveraging these insights can give small businesses a competitive edge.
3. Safer connections
Instead of encouraging people to enter their online banking credentials on third party websites, Open Banking will grant permission for data to be shared directly from the bank securely.
When transferring data via an Open Banking API, there’s no longer any need to share online banking details such as usernames, passwords, ID numbers or memorable words – as they’re only ever used with the original bank or financial institution.
To allay any suspicious around legitimate suppliers it is possible to check that the third-party is FCA authorised via their register. This means that they are regulated by the Financial Conduct Authority, who check that the business is working to a high financial security standard.
Opening doors to new opportunities
The opportunity for Open Banking to help small businesses is game-changing, but we’re still just at the beginning.
Industry leaders from across various sectors must collaborate more closely to ensure Open Banking is no longer just a buzzword, and instead becomes synonymous with a tailor-made financial service. This means all of us in the financial technology industry have a responsibility to help small businesses understand how empowering Open Banking can be for them and their business.
Small businesses that embrace upcoming innovations will see efficiencies that save time and drive productivity. This, combined with access to new insights, will help them focus on what really matters – business growth and better work-life balance.
For the latest information on Open Banking and how QuickBooks is using these advances in tech capabilities to support and help its customers prosper, visit: www.quickbooks.co.uk/open-banking.