Open Banking: Financial revolution for SMEs or serious fraud risk?


Last weekend, a fundamental change to the way that businesses and consumers can bank, manage and spend their money online was introduced.

So will Open Banking revolutionise the way you manage your business’s money, or will it put your financial data at risk?

Here we explore both sides of the debate.

On 13 January 2018 Open Banking began its managed roll out. It’s a data sharing revolution that has caused widespread debate.

Its supporters claim that it will completely revolutionise how we bank and give businesses and consumers access to the best products for them, whilst its critics worry that it presents serious fraud risks.

But, exactly what is it? And how could it impact your business?

What is it?

Your financial data is valuable. But until recently it wasn’t yours.

Historically this information was held by your bank. But now, under Open Banking, the data is yours to share with whoever you want.

Driven by a new EU directive and new UK competition rules, Open Banking require banks, building societies and other financial providers to let customers easily and securely share this financial data with other banks and other regulated financial businesses if the account holder requests it.

By sharing this information with third parties, they’ll be able to analyse your data and guide you to better deals, or better ways you can use your money.

Nine UK banks are required to comply with the new rules – Barclays, Lloyds, Santander, Danske, HSBC, RBS, Bank of Ireland, Nationwide and AIBG. Five of these have been given more time to comply.

How does it work?

  1. You’ll have to give your consent to a third party provider if you want them to access your personal or business current account information or request for a payment to be made.
  2. If you choose to do this, you’ll be directed to your existing bank or building society’s online banking login page where you will log in securely to share your account information or allow a payment to be made from your account.
  3. Once you’ve authorised your bank to securely share the information or make the payment, the app or website will only be able to use your information for the agreed purpose.

How can businesses use Open Banking?

To use Open Banking businesses will need a business current account and must be registered for your bank’s online business banking service.

There is potential for businesses to benefit from automated credit control and invoicing or cashflow management. Plus, applying for loans and other financing options could all be done quickly on your smartphone too.

Some potential business uses could include:

Getting a better deal

Price comparison websites could access your business account transaction history and analyse your spending patterns to suggest better business current account, business credit card or overdraft deals.

Managing your accounts

Accounting software could access your business account transaction history and analyse your data in order to automate your company accounts.

Applying for business finance

Lenders could access your business account transaction history to work out your business turnover, cash flow and expenditure and offer you a facility based on their findings.

Automating invoice payments

Invoice payment websites could access your account balance to automatically work out the best time to pay invoices and request that payments are made for you.

Saving money

Budgeting apps could access your data to analyse your spending habits and save affordable monthly amounts on your behalf.

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The benefits for businesses:

Supporters of Open Banking say that it will drag lenders into the 21st Century and allow businesses to better manage their money by consolidating all accounts into one place.

Puts you in control of your data:  

Instead of financial data about how you spend your money, how often you are overdrawn and other details being something jealously guarded by your bank, you’ll be able to request that approved companies can also access it.

No obligation:

You are under no obligation to share your data with anybody. Users decide what information they share and for how long.

Clearer view of your finances:

With the ability to see several accounts just by logging in to your bank, you can easily see how your business is doing, monitor your spending or improve your budgeting and forecasts.

Better deals for your business:

Comparison services will be able to give you access to more competitive, tailored products and services based on your actual account data.

Could speed up the switching process:

When you find a better deal elsewhere there is the potential for you to be able to move banks within an app, without ever visiting the website of the actual bank, making it easier to move, manage and make more of your money.

Faster finance applications process:

Finance applications could be dealt with more quickly, as lenders and brokers could access spending history directly, rather than ask for printed copies of bank statements.

Encourages banks to be more competitive:

It is hoped that the changes will foster competition from challenger banks, fintech companies and utilities by allowing them to develop products such as apps that aggregate a customer’s financial details from multiple banks and use it to develop services tailored to their needs.

Easier to set up and make payments:

It will be quicker and easier to set up and make payments directly from your bank account.

Further potential:

It has been suggested that future benefits of Open Banking could extend beyond finances. For example, by seeing exactly what you bought for lunch each day, an app could analyse the calorie levels, and then cross-check it with how much exercise that person is doing.

The potential downsides:

On the other hand, critics have a much cloudier outlook, with concerns over security and the potential for a new digital crime wave.

Fraud risks:

There is potential for higher risk of data theft either from phoney companies pretending they are authorised to obtain data, or through regulated firms which may be susceptible to being hacked.

Harder to prove who is at fault if data is stolen:

It has been argued that Open Banking will create complex chains of data access, making it harder to prove who is at fault if data is stolen.

Few people know about it:

Despite being one of the biggest developments in banking in decades, the banking milestone seems to have eluded the public with 92% of people saying that they haven’t heard of Open Banking, according to research conducted by Which?.

Fear around sharing data:

Understandably many people will be sceptical about sharing their data with third parties and could be worried about whether shared data will remain secure. According to a survey conducted by Accenture, 69% of consumers said they would not share bank account information with third-party providers. In fact, 53% said they would never change their current banking habits and make use of Open Banking rules.

Not all banks are keen on the idea:

Some banks have raised concerns about the change and are not keen on the idea of helping their rivals take their customers. This could mean that the roll out will move more slowly than predicted.

Information may not be impartial:

Whilst a third-party app may find you a deal that saves you money there’s no guarantee they’ve searched the whole market to find the cheapest tariff. They may just offer deals from a panel of companies who pay them for new business.

Risk of sacrificing quality:

The cheapest finance deals aren’t always the best. Whilst these apps may suggest cheaper alternatives the service levels or suitability for your business may not be as good. It’s important to always consider what value a service provides you as well as the cost.

To find out more about Open Banking visit:

So, what do you think? Is Open Banking a good thing for businesses? Or is it a risk to your personal data? Let us know your thoughts in the comments below.


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