Procurement · 10 July 2018

Open banking 6-month review: The biggest innovation since the cash point?

open banking
Small business owners can now give regulated providers access to their banking data

On Thursday 13 July, it will be six months since open banking reforms were introduced, designed to inject greater competition into Britain’s financial sector and provide more choice for consumers with their banking services.

By allowing regulated providers access to financial information previously held only by banks, consumers and small business owners were promised a new world of products to manage their finances. So has anything changed so far?

According to Gianluca Corradi, head of UK banking practice at pricing specialists Simon-Kucher, the impact of open banking so far had “yet to be dramatic”, as banks take time to get to grips with compliance and take advantage of the changes.

“However, internally there has been a lot happening,” he said, adding that the threat posed by fintech companies to the natural banking order had not gone unnoticed by lenders.

“Open Banking is already leading to more competition overall and a faster pace of innovation at the established banks through them now facing a much greater fintech threat, which is becoming ever stronger.”

HSBC’s Connected Money app – which allows customers to see their accounts at up to 21 different banks in one place – is an example of one new service capitalising on the reforms.

“The established banks are well positioned to keep their overall leadership of the market because they have been investing.  They may be moving at a slower pace than the fintechs, but there is an inherent inertia in the market, which prevents sudden changes in market share,” Corradi explained.

“The difference in a few years won’t be between big banks winning or fintechs winning and vice versa, it will between which banks and fintechs invested successfully in becoming the most customer-centric and those that that didn’t and lost.”

Read more about open banking reforms:

Small business products

Small business finance provider Liberis has also embraced the reforms, partnering with open banking technology firm Openwrks to open up its application platform.

Having been granted access to real-time customer transaction data, Liberis is now able to assess applications for finance without the customer having to provide additional physical proof of their transaction history.

Commenting on the impact of reforms, Jonny Hawkins, head of data science at Liberis, said open banking was “revolutionising the finance industry”.

“By making the funding application process easier, faster and fairer for small businesses, we can help more small business owners achieve their ambitions and further support their growth.”

Openwrks founder, Olly Betts, said small business owners were already seeing the benefits of open banking.

“Not only do they have less of an administrative burden when applying for finance, but it also means lenders like Liberis can make faster and better lending decisions. Decisions accurately tailored to the specific circumstances of every single small business,” he explained.

“This is a watershed moment for small business finance and one that I believe will lead to more small businesses getting the money they need to grow.”

With more innovations expected to reach the market over the next year, Corradi remains convinced that the best is yet to come.

“I am sure over the coming years its impact on customers will be profound and positive, the biggest improvement for bank customers since the introduction of the first cashpoint in 1967… and maybe it will prove even more profound.“

__________________________________________________________________________________
ALT_TEXT

A business banking revolution? The best challenger banks for startups

To find out if UK banking’s newest entrants have revolutionised financial services for entrepreneurs, we’ve handpicked the best challenger banks available today.

__________________________________________________________________________________

Sign up to our newsletter to get the latest from Business Advice.


 
TAGS:

ABOUT THE EXPERT

Simon Caldwell is deputy editor at Business Advice. He has a BA in politics and communications from the University of Liverpool, and has previously worked as a content editor in local government and the ecommerce industry.

Q&A

If you’ve found the article above useful, but have a more detailed and bespoke question, then please feel free to submit a query to our expert. We at Business Advice will get in contact with them on your behalf and arrange for a personalised response. These questions and answers will then be collated on the site for any other readers who have similar queries.

Ask a question

Business development