Open banking for business

“Open banking offers an innovative and seamless way for small businesses to better manage and track their finances. We found that approximately three quarters of small businesses struggle to accurately forecast their earnings each year – open banking tools should improve this, providing real-time insights into their business and finances.

Many small businesses will already be using different subsets of open banking without even realising it – most commonly cloud accounting. As the economy continues to digitalise, many small businesses will begin utilising new technologies – open banking should definitely be part of this. The additional, real-time insights it can provide will be invaluable to businesses as they navigate through any recession we face.

Open banking has the potential to revolutionise access to finance, and the payments landscape. These are two areas that small businesses have traditionally struggled with due to power imbalances and a lack of competition in the industry. Improvements through open banking will only be beneficial to the small business community.”

“Within the coming months, I expect open banking to become a requirement for any form of consumer or SME debt finance. Open banking provides lenders – as well as consumers and SMEs – with transparency in relation to the borrower’s financial position in near real-time, thus enabling them to provide bespoke financial offers.

Drawing on historic and current data, and using the profiles of borrowers who are deemed to be in a similar financial position, open banking providers can share information on the relative value of finance offers at the point at which the prospective borrower shares their financial data. This can help individuals and businesses to make more informed decisions prior to applying for finance.

This also supports the FCA’s Consumer Duty initiative in relation to consumers. However, while I do believe that – if done properly – Customer Duty will have an impact on the lending landscape for consumers, I don’t expect there to be much impact on the SME lending landscape until 2024, given that the SME market typically lags behind the consumer market.”