What is open banking?
The Competition and Markets Authority (CMA) decided that older banking institutions are too dominant, and smaller, newer financial brands and organisations need more room to grow and access the market. Simultaneously, consumers and small businesses could be banking with services that suit their needs more, but because they’re less prominent than the big names, we’re not getting the best deal.
With open banking, customers will be able to “share their data securely with other banks and third parties, allowing them to compare products on the basis of their own requirements”. Rather than feeling trapped with their mainstream bank, they can easily access bespoke solutions from other services.
Which banks are involved?
The larger institutions below will deliver open banking to their customers. Small challenger banks, FinTech companies, third parties and consumer groups can be involved if they have the relevant security and messaging technology.
- Allied Irish Bank
- Bank of Ireland
- Lloyds Banking Group
- RBS Group
When does it come into play?
The nine institutions above have to start sharing their data with challenger banks and third parties from 13 January 2018.
More options for your small business
The banking industry has been fairly rigid in its treatment of small businesses since the 2008 recession, meaning raising finance has been a difficult process. With open banking, small businesses will be able to get better solutions from small firms, FinTech groups and startups, making moving away from conventional banking institutions far easier.
Improved technology means your business can send and receive payments much faster, instead of relying on banking timeframes, which slow down even more during public holidays. Hospitality businesses in particular are often at their busiest during these periods and shouldn’t have to wait for banks to resume their full activities.
Easily share your information with third parties
Money management software and cash flow projection will be much more comprehensive and detailed when you can compile all your financial info in one place. Third parties will be able to see what your current activity looks like and advise you in more specific detail, rather than you having to manually input information.
Improved credit ratings systems
Being able to see credit ratings for other businesses you work with could prevent financial mismanagement in the future. The more information your business has, the more equipped to negotiate with suppliers and clients you’ll be.
Your small business can access flexible finance right now through Capify. If your business takes payments through a card terminal you could raise £3,500 to £500,000 for expansion and refurbishment, and only repay as your business earns.Get A Quote