Open Banking for SMEs Explained

Open Banking for SMEs Explained
As the rise of big data continues to turn the world of finance on its head, Open Banking promises exciting opportunities for business owners.

Instead of viewing data as yet another chance for big corporations to take advantage of your information, Open Banking helps you win back control of your finances. Gone are the days of sifting through piles of paperwork to find the right service provider — Open Banking does all the hard work for you.

So, what does Open Banking mean for SMEs and how is it changing the world of finance?

Join us as we explore the benefits of Open Banking and explain its powerful applications in Merchant Cash Advance (MCA) services.

What is Open Banking?

Open Banking is a set of banking practices providing third party financial services providers read-only access to your personal or business financial information. It will allow connectivity of accounts and data sharing amongst institutions, such as lenders, providing the best in market product for consumers and businesses.
Open Banking was officially introduced to the UK in 2011 with the Midata initiative. In 2015, the Open Banking Working Group was established by HM Treasury originating from a set of EU regulations called the Payment Services Directive (PSD2).
Over the past five years, the government has worked closely with UK banks to ensure that Open Banking prioritises safety and security as core values in delivering a service that will reshape the banking industry as we know it.
As such, all customers utilising any Open Banking service must provide consent before service providers can access their financial banking information. Once consent is granted, banks will receive read-only access to the customers account and the customers can withdraw consent at any time.
Under Open Banking, Great Britain's six largest banks and the three largest Northern Irish banks (the CMA9) have been required to give their business and personal customers the ability to share their financial information with third party providers on an ongoing basis. In addition to the CMA9, an additional 52 banks and building societies offer Open Banking and this number is growing continuously.
Open Banking focuses on the following three areas to provide a fully regulated and secure service:
  • Improved customer rights. New regulations on surcharging, currency conversions and customer complaints are designed to put the customer in control.
  • Strong customer authentication. Tightened security measures require banks to include three layers of authentication to protect all transactions.
  • Third-party data. Improved protection and access to customer data helps banks create enhanced services and personalised customer experiences.

Enhanced Security with Open Banking

Open Banking has been carefully designed with security and safety in mind. The Open Banking 2019 Review explains their four pillars to enhanced financial security:
  • Bank-level security. Open Banking is built upon tried and tested security systems which mean customers will never be asked to provide banking passwords or private login details by the service provider.
  • Regulation. The Financial Conduct Authority (FCA) keeps tight control of which apps and websites can use Open Banking.
  • The customer is in charge. Customers have complete control over who has access to their data and when they have it.
  • Guaranteed protection. Banks and building societies are required to repay customers in the event of fraudulent activity. Customers are also safeguarded by data-protection laws and the Financial Ombudsman Service.


What Will Open Banking Look Like for SMEs?

With over 5.7 million small businesses in the UK, Open Banking presents exciting opportunities for SMEs to take control of their finances, enhance productivity and cut costs.
As any small business owner will understand, dealing with big banks who wrap themselves in red tape can be tough. Whether you’re applying for a loan or processing employee payroll, many traditional banks aren’t on the same wavelength as your business.
However, things are about to change.
PWC estimates that Open Banking will create revenue opportunities for retailers and SMEs over £7.2 billion by 2022.
Increased financial transparency will help small UK businesses improve productivity and compete on the world stage. Automated finance tools can help to maintain steady cash flow and earn positive returns on credit balances.
Instead of bowing to the needs of big banks, Open Banking is (quite literally) opening new doors for smaller businesses to thrive in a marketplace that works around them.

What Are the Benefits of Open Banking for SMEs? 

Opening the floodgates to big data using Open Banking helps third-parties create sophisticated application programming interfaces (APIs). APIs can integrate with existing financial services to solve customer pain points, suggest relevant products and improve functionality.
Whether it’s helping first home buyers find the right mortgage or getting your hands on extra cash when you’re feeling the squeeze, Open Banking offers a host of opportunities for SMEs.
Some of the key benefits of Open Banking include:
  • Increased Productivity. Automated technologies increase the efficiency of repetitive tasks and learn from big data sets to offer a customer-orientated service.
  • Centralised Services. Gone are the days of opening a current account with X, applying for a loan from Y and sending money overseas with Z. Financial service providers can connect multiple APIs to offer multiple services under one roof.
  • Accelerated Innovation. The growing appetite for Open Banking will drive innovation and break down barriers for emerging fintechs.

Open Banking & Business Cash Advance: What's the Link? 

Does your business struggle with cash flow, miss out on marketing opportunities when money is tight or requires quick access to money?
Open Banking offers a seamless application process to help you get your hands on fast and flexible cash. Access to big data and automated systems allows finance providers to understand your business requirements and cash flow, offering you affordable and appropriate financial products.
If your business accepts credit or debit card payments, Open Banking can combine with merchant cash advance (MCA) providers to offer affordable funds that work for you. Utilising a cash advance means you only pay back the advance when a customer pays you.

With 71% of SMEs expected to adopt Open Banking by 2022, UK business will have the funds they need to attract fresh talent, invest in their business and drive their marketing efforts for sustainable growth.

Embrace Open Banking with 365 Business Finance

At 365 Business Finance, we are continuously innovating to offer business owners a fast application process, with swift and precise credit decisioning that allows immediate access to cash.
Utilising Open Banking will expedite your funding application as we are able to review, via read-only access, your businesses transactions, allowing our credit team to make a quick and well-informed decision. At 365 we have seen a 50% adoption rate from our clients who have used Open Banking as part of their application journey, which significantly reduced their processing time.
In addition, Open Banking offers business owners a reduction in their carbon footprint as there is no need to print multiple paper documents nor a need to upload or email documents.
365 Business Finance is offering businesses a seamless Open Banking application process for £5,000 - £200,000 in a matter of minutes, allowing you to focus on running your business.
Learn more about Open Banking and our business cash advance today!

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