APPENDIX

Scope of ecosystem audit

The Ecosystem Audit is a core part of the analysis driving the immediate outcomes and is summarised in Section 3. This appendix provides additional detail on the scope. It is clear the open banking ecosystem is becoming more complex and several models are used to bring products and services to market. Our analysis focuses on one part of this market. Other parts of the market which are not included are:

Agents: there are several agents of AISPs registered with the FCA (although not all of these may be live-to-market). Operating as an agent of an AISP provides an alternative route to market for some participants.

Third Parties Not Providing AIS (TPNPA): Several TPNPAs have been provisionally identified. These firms receive data from regulated AISPs, but do not act as regulated AISPs themselves.

Technical Service Providers (TSPs): TSPs do not offer a service to the end-user, so are not included in this analysis. It is, however, clearly a powerful enabler of market development that these firms support regulated parties bringing products and services to market.

We do not include agents, as they are not on the Directory. TPNPAs are not included in this analysis as there is no available data source which would allow us to quantify their role or the number of products and services which they provide. Any arrangement between an AISP and a TPNPA to onward share data is confidential. TSPs are excluded as they do not provide a product or service to the end-user, but they are nonetheless important enablers of ecosystem growth. In future iterations, the Impact Report could be expanded to include agents and TPNPAs, however there are practical constraints in doing so which would need to be overcome. This limitation should be considered in reviewing the results in Section 3.

Outcome areas

Customer survey - research design

The aim of this research was to understand user experience of using open banking-enabled cloud accounting propositions and the impact that businesses are seeing from their use. The survey fieldwork was undertaken via a business panel run by a UK-based provider which offered an excellent way of contacting a large pool of UK small businesses.

Pilot study

In addition to the main study, we also undertook a preliminary pilot stage in March 2022 to test the likely penetration of cloud accounting in the three groups listed previously. This was to determine if a sufficiently high proportion of small businesses in each segment use cloud accounting to be able to meet the target numbers for the main study. In the main study we asked several profiling questions and if they were using a cloud accounting package, and to confirm their provider to verify their response. This provided results on the penetration of cloud accounting across various small business segments and was used to inform the sample selection in the main study. We elected not to make the composition of this study broadly representative of the UK small businesses population, which is dominated by businesses with no employees and non-VAT-registered entities. We took this decision to ensure that findings provided insights into the differentiated accounting needs of a wide range of small businesses. We did, however, limit recruitment to small businesses with under 10 employees on the basis that large small businesses are likely to have more complex accounting needs that may not be well catered for by typical cloud accounting packages.

Panel recruitment

We used an online business panel to recruit participants in an online survey. Our screening criteria ensured that the business was using a cloud accounting package, and that the participant played a key decision-making role in the business. We set quotas to ensure recruitment of 300 subjects in each of the chosen sub-groups. The final composition of the study comprised three broadly equal groups. 904 in total as follows:

Sole proprietors / no employees (302)
Companies with 1-4 employees (302)
Companies with 1-4 employees (300)

Twelve small businesses were screened out on the basis that they managed company accounts and book-keeping manually or with spreadsheets. The questions asked in the survey were drafted by the OBIE before being refined through several iterations based on input from Marketing Means’ research team. The survey questionnaire was designed to take no more than 10 minutes to complete. The research itself was conducted by an independent research agency, Marketing Means, operating to the requirements of the MRS Code of Conduct.

Profile of respondents

VAT registered

Annual turnover

Turnover vs employees

Sector

Preparation of annual accounts

Theory of Change model

The Impact Report is based on a “Theory of Change” – consistent with methodological approaches used to evaluate the intended impacts of policy interventions. It helpfully illustrates the progressive intermediate steps required to achieve the ultimate desired goals. The Theory of Change established three key components that it is important to measure:

Outputs and immediate outcomes (availability and awareness)

A necessary first step to achieving ultimate outcomes is availability, awareness and positive perceptions of open banking-enabled products and services. However, there is consensus that customer awareness of open banking technology is less important than awareness of open banking-enabled propositions and services.

Intermediate outcomes (experience)

The second step is customer adoption and a positive experience of open banking-enabled products and services that meet their needs.

Ultimate outcomes (benefits)

The third step is that customers experience sustained benefits from being able to access and use open banking-enabled products and services in a way that improves their financial position.

In the first Impact Report, we set out six customer outcome areas that provide a comprehensive, but concise categorisation of the customer objectives of open banking, as set out in the CMA Order. Our Ecosystem Audit analysis continues to demonstrate that, with very few exceptions, the propositions in market consistently fall within these categories. These outcome areas are shown in Appendix 4. We anticipate that the accuracy of the measures will improve in future Impact Reports as we develop new data sets, commission additional research, and with the continued growth of the ecosystem. A critical mass of customers using open banking-enabled services is a key prerequisite to drawing any reliable conclusions as to ultimate customer outcomes.