Open Banking – setting up small businesses for success

Open Banking – setting up small businesses for success

Ola Malomo, Head of Bank Partnerships U.K. & France, Intuit QuickBooks discusses what the much-tipped Open Banking revolution actually entails, what it means for small business success and prosperity, and how accountants can capitalise on the changes.

Open Banking – setting up small businesses for success

What is Open Banking, really

If you have heard of Open Banking, it’s more than likely in the context of the likes of Yolt – new apps in the consumer banking space amalgamating customer data from various sources. By allowing these apps to access their data, customers are offered the potential of insights into their spending, or automatic savings rounded up to the nearest pound from any card payments.

Despite being around for a year now, most would agree we’re yet to see Open Banking fully come into its own in making drastic changes to the way most people manage their finances. It’s also relatively intangible – making it easy to ignore altogether. But to understand its potential, we need to understand what it actually is.

The country’s nine largest banks (including one building society) are being mandated to allow their customers to securely share their data with other financial regulated entities. That’s it. To see real impact therefore, third-party organisations must build compelling products that put this raft of new customer data to good use.

What has gone almost entirely unexplored so far has been the impact of Open Banking on small businesses, as opposed to consumers.

To a large degree, this is where the most significant short- and medium-term opportunity could lay. Unlike in the consumer banking space, where the perfect use case is potentially still round the corner, the small business use case is staring us in the face – bringing visibility of cash flow under control, once and for all.

Cash flow and small business success

Anyone who spends time reading these pages understands the importance of effective cash flow management to small business success.

Depending how exactly a business begins and grows, there will often come a point not too far into its future where cash flow management becomes significantly more complex than the owner can understand by simply downloading their bank statement occasionally, or even with hours spent on complex spreadsheet pivot tables.

Dedicated tools have long been able to provide a much clearer picture of a business’ cash position, enabling management to take decisions about stock purchasing, financing, investment and capacity to take on new orders with increased confidence.

With the evidence suggesting poor cash flow management is often a significant factor in business failure, it follows that better cash flow management helps businesses to flourish – for example, if small businesses were paid on time, this could boost the economy by an estimated £2.5 billion annually.

Taken at the macro level, by helping the nation’s small businesses keep control of their cash, financial management tools strengthen the economy, keeping small businesses in-business, productive, and able to compete at the national and international level.

Open Banking – taking cash flow management to the next level

How does Open Banking fit into this? For the first time, rather than financial management software needing to rely on inconsistent banking data, at its worst manually entered from one system into another, or at its best transferred through ‘screen scraping’, where one system uses a customer’s credentials for another system to log in and attempt to ‘read’ the data, Open Banking introduces a fully regulated and reliable, automated safe and secure system for data exchange.

On its own, much like in the consumer case, this isn’t particularly exciting, but paired with the business value of the resultant cash flow insights, the opportunity to help businesses flourish is truly game-changing.

For example, rather than being limited to a maximum backdating of data import via the current system of ‘screen scraping’ of just three months, Open Banking allows the import of up to 24 months of data. Open Banking is significantly more secure, using strong authentication directly with the customer’s bank, rather than the application accessing the data.

Permissions can be modified and revoked centrally with the bank if ever required. Data can be assumed to be essentially completely accurate, as it is provided directly in machine readable, rather than human readable format.

The most immediate impact is on the capacity of specialist software to use artificial intelligence and machine learning to provide even more detailed, accurate and insightful cash flow reporting and forecasting than is currently available.

Consider the wealth of data that comes with bank transactions, and the possibility to show trends in purchases of certain types, or an over-reliance on sales to a particular individual or group of buyers. The ability to spot and flag anomalous months of data automatically, or to match invoices to payments received into the business’s bank account.

The role of accountants

If Open Banking is then such a boon for businesses, how does it impact you as the accountants who work with them? Quite simply, it is an opportunity for you to further demonstrate your role as a strategic adviser to the business.

With a regular and consistent stream of accurate bank data flowing into your client’s accounts, you’ll be in a much stronger position to provide the best insight and advice, based on the data and your own knowledge.

For example: How does your client compare with peers in the industry and local area? What are the specific circumstances of the management team that dictate what actions they can and can’t take in response to the information? What wider support might the management team need in terms of consulting or human resource to implement changes?

As a first step, simply tell your clients that there’s a new secure way to connect their accounting software to their bank so that data is transferred immediately, eliminating errors, duplication and wasted time flitting between the two.  This time saving for them ripples back to benefit you too, as we know that the old ways of screen scraping could be temperamental and, usually when you needed that data in a hurry.

Open Banking shouldn’t and needn’t be about banks. It should be about the ease and simplicity it brings to a business owner running their business, and the resultant business benefit of a stronger and more resilient business, better insulated to any future financial shock.

But having said that, for the time being, as the banks start the process of releasing their Open Banking APIs, identifying which of their accounts they will support and gradually switch off ‘screen scraping’ between now and 14 March 2020, we all need to navigate these changes with them to help ensure people have the best experience.

As the changes cascade into the day-to-day of business, get out there and get your clients trying it. You and they may just be pleasantly surprised about the range of benefits brought about thanks to the two minutes spent in turning on the ‘connect to my bank account’ switch.

For the latest information on Open Banking and how Intuit QuickBooks is using these advances in tech capabilities to support and help its customers prosper, visit:

Resources & Whitepapers

The new rules of accounting

The new rules of accounting

5 ways internal productivity can boost your profitability

5 ways internal productivity can boost your profitability

Crushing the Four Barriers to Growth

Crushing the Four Barriers to Growth

Make MTD work for you

MTD Make MTD work for you


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