Open banking was introduced to the UK in 2018. This means that customers of UK banks are now allowed huge control over their personal data, and can decide who they can share it with.
The goal of open banking is ‘increasing competition and innovation’ regarding the financial products available to business owners.
But, do UK businesses trust the promises of open banking? We’ll have a look at the pros and cons below.
What Is Open Banking?
Open banking aims to be entirely customer centred. The goal is to collate a businesses’ invoices, cashflow, payroll, utilities and tax data all in one place so that it can be used to benefit the business.
The new rules state that banks, credit card companies, and other financial institutions MUST allow their customers to share their financial data securely with third party providers that meet certain regulatory requirements.
These third parties are therefore encouraged to develop new services that can vastly improve the way that business owners run their businesses.
The Verdict On Open Banking…
However, the majority of small businesses owners in the UK are worried about open banking, and the concept of sharing their data electronically.
The Federation of Small Businesses did a survey of 1000 business owners, and only 1 in 7 said that they were taking advantage of open banking, and sharing their business bank details with third parties.
Which means that most businesses aren’t convinced by the benefits of open banking, and aren’t willing to take the risk.
A Breakdown In Trust & Mixed Messages
One of the big reasons why business owners are pushing back on open banking, is due to the loss of trust over the past few decades.
Mike Cherry of the FBS, reflected on this survey by saying:
“This was always going to be a hard sell – one moment we business owners are told to do all we can to protect sensitive data, the next we’re being told it’s safe to dish it out.”
The data sensitive era has been heavily promoted in the past decade; protect your data at all costs! Now, for many, it feels like one huge U-turn.
Also, businesses are still feeling the effects of being stung by the financial crash in 2008. That breakdown in trust takes time to rebuild.
The Future Of Open Banking
Time will tell when it comes to open banking.
The government will have to work hard to convince current small businesses that there are huge benefits with open banking.
They will also have to practically show how sharing your information with third parties could rapidly improve the way your business runs in the coming years.
However it’s likely that the new generation of business owners, who are coming through as digital natives, will be ready to get the most out of any and all technology, and are likely to dive in with both feet.
They won’t have the same drawbacks of the financial crash impacting them, and are often quick to see the benefits that technology can bring to their lives and business models.
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