Open Banking for Small Businesses: A Promise Yet to Be Fulfilled

Despite the buzz around Open Banking, its implementation remains limited. Here’s why:

1?? Market Protection: Local banks and regulators are protecting their markets from newcomers. It’s a fact that an EU fintech from one country faces significant barriers (including 'passportization') when trying to enter another EU market.

2?? Limited Data Sharing: Banks have shown little interest in sharing data with competitors. As a result, they’ve implemented only the minimum capabilities required by the PSD2 regulation.

The outcome? Customers see little added value from Open Banking at the moment. Usage, especially among small businesses, is very low.

Perhaps the introduction of PSD3 will change the game. However, its focus seems to be more on expanding regulation to other markets rather than increasing usage.

The promise of Open Banking is immense, but we’re still waiting for that promise to be fulfilled. Let’s hope the future brings more openness, collaboration, and value for customers.

However, I strongly believe in a future of open finance. Why is it important for banks and small businesses?

1. Technology is the backbone of small business resilience: Small business owners are increasingly relying on technology to navigate the ever-changing business landscape. As a banker, it is important to understand the role of technology in empowering small businesses and provide them with the necessary tools and solutions to adapt and thrive.
2. Open banking empowers small businesses: Open banking represents a paradigm shift for small business owners, allowing them to make smarter business decisions and manage their finances more effectively. As a banker, embracing open banking and partnering with small business owners can create opportunities for growth and collaboration.
3. Cybersecurity is a top priority: Small business owners face increasing cybersecurity threats as their businesses grow and become more digital. Providing cybersecurity solutions and guidance is crucial to help small businesses protect themselves and build trust with their customers.
4. Rising costs are a major concern: Small business owners are grappling with rising costs, including inflation and the cost of goods. Understanding their pain points and offering tailored financial solutions can help alleviate their financial burdens and support their growth.
5. Access to capital is essential: Small business owners are seeking faster and easier access to capital to fuel their growth. As a banker, providing customized funding options and streamlining the loan application process can be a valuable service for small businesses. Overall, as a banker responsible for small businesses, it is important to recognize the challenges and opportunities faced by small business owners. By offering technology-driven solutions, addressing cybersecurity concerns, and providing tailored financial support, you can become a trusted ally and partner in their journey towards success.

Here are some expert opinions:

1. European Commission. Revision of Directive (EU) 2015/2366 on Payment Services. Read the briefing: https://bit.ly/3P9xKdI.
2. MasterCard. Empowering Small and Mid-sized Business Growth by Unleashing Its Data. Read the report: https://bit.ly/48KIqq0.
3. G20, IFC. Innovations in Financial Services for Micro, Small and Medium-Sized Enterprises. Read the report: https://bit.ly/48ZugBP.
4. AltFi. 2024: Open Finance’s Moment To Shine? Read the report: https://bit.ly/3T4VTmL.
5. UK Open Banking. The Open Banking Impact Report: March 2023. Read the report: https://bit.ly/4civN8X.

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