Open Banking: What Does it Mean for SMEs?

What Does Open Banking Mean for SMEs?

Now that Open Banking is a reality, here's a summary of how it could impact your business

By Adam Pescod

In August 2016, the Competition and Markets Authority (CMA) unveiled proposals to shake up the UK’s banking sector and give customers more control over their financial data. A little under 18 months later, Open Banking is finally here. But what exactly does it mean for British businesses?

With CMA data showing that only 4% of business customers switch their bank account every year, a large part of Open Banking is about creating more competition in the financial services sector, and encouraging customers to explore and compare alternative products.

The nine major high-street banks are now obliged to share customers’ data with third-party providers who can then point customers towards products that might better suit their circumstances, or to build new products that fundamentally improve people’s experience of financial services. However, banks can only share this data with their customers’ permission, which means control is now firmly in the hands of consumers, not the banks.

It’ll be a while before businesses really feel the benefit of Open Banking, not least because five of the nine big banks missed the initial deadline for implementation. However, here are some examples of how the initiative could improve the lives of business owners across the UK:

Imran Gulamhuseinwala OBE, trustee of the Open Banking Implementation Entity and global head of fintech at EY, said: "It is difficult to overstate just how revolutionary open banking could, and should, be. New products will emerge from incumbents and entirely new entrants will join the market. New ways of managing money, of making life-changing financial decisions, of paying for things, will appear."

The Open Banking website offers further information on the initiative and how you could potentially use it to your business’s advantage.