COVID-19 Open Banking

How Covid-19 turned out to be Open Banking’s moment to shine (Constanza Castro Feijóo,

If you were to ask a UK business in the past few months whether they use Open Banking, they might look confused.

But if you asked them whether they’ve been using digital tools to help them forecast their cashflow, see their accounts in real time, issue paperless invoices to clients or apply for a government loan through an online broker, many if not most would say they are.

Open Banking is an emerging UK financial services success story, but many simply haven’t heard of it.

Read more: Unleash the power of digital across our nation

The UK is a world leader in this field, and over the past few years, we’ve been building a secure framework that allows banking customers to share their data with a trusted third party provider, who can help save them money, time, or find a better deal.

There are already two million individuals using Open Banking enabled tools, even if they don’t know it. But one of the consequences of the pandemic has been to bring many of these benefits to SMEs too.

A new survey by the Open Banking Implementation Entity (OBIE) shows that, since the start of the pandemic, half of the UK’s small business community have been increasing their use of these services, as they look to future-proof their business operations.

While small businesses have historically been slow to change their financial products, the research points to a sharp increase in switching (19 per cent) among respondents, indicating a growing willingness to shop around for better deals.

And that’s only the start. The pandemic appears to have acted as a catalyst for SMEs to digitise their business services, with the help of Open Banking tools.

So how is this new framework helping small businesses to realise their potential?

The most popular products include cloud accounting (used by 24 per cent of SMEs), which allows firms to manage their accounts and invoices online, as well as giving access to trusted third parties such as accountants. Then there are the 21 per cent utilising cashflow forecasting tools, which use artificial intelligence to reliably predict how much money a business will receive and pay out over a set period. 

And at a time when many small businesses have been struggling, Open Banking can help with debt too. It is unsurprising that the survey shows an increase in SME borrowing: 46 per cent of small businesses which are in debt have taken out more than half of that debt in the last six months, while two out of three have signed up to government support schemes, with 63 per cent concerned about their ability to repay.

But Open Banking helps both sides in this equation. For lenders, such tools give them a real time picture of the business and what is appropriate to them. Likewise, the SME can find a loan product that suits them best. Indeed, 60 per cent of small businesses that used alternative credit said it made them more resilient.

There can be no doubt that the pandemic has been a key driver of Open Banking adoption. According to the poll, three in five started to use these services in the past six months as a direct result of Covid-19. 

Users of these products were overwhelmingly positive about the benefits that Open Banking services have brought to their businesses. For example, 41 per cent of those which use cloud accounting said it has reduced the administrative burden of paperwork, while cashflow forecasting customers said this had helped them to understand their businesses better. 

The pandemic has brought vast changes to the way we live and work, many of them deeply negative. But one clear positive from this disruption is that the UK’s small businesses seem to have finally recognised that Open Banking can help them become more resilient, productive, and profitable.

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