Open banking: What can it do for SMEs today?

Let banks share my firm’s financial data? Are you mad? Well, no, not at all – and having the bank share your data could actually be an astute step for your business.

Before you start reaching for the phone to call the men in white coats, answer me this? Do you know everything? And when the answer is ‘no’, because it always must be, ask yourself if you have time to research all the options available to you. If you’re in business, the answer will be another ‘no’. You have a business to run, with a stack of other demands on your time.

And that’s why you should give serious consideration to letting your bank share financial data. Sharing financial data is something we’ve been doing at ExpenseOnDemand for years, with sustainable benefits to expense management for customers month on month. But let’s start at the beginning.

What Open Banking is

Open Banking is a new dimension in banking in which computers talk to each other, allowing third party developers to develop apps and services around a financial institution, all of them designed to give companies and individuals better products and services. Here’s a simple example of what’s possible: Is your overdraft too expensive? You could spend a long time looking for a better option through an online comparison site – or you could authorise a comparison app to compare your unique situation with available options with a view to finding a better fit. That’s possible with Open Banking.

This isn’t a new idea. Its first major milestone was in October 2015, when the European Parliament signed off a directive called PSD2, which encouraged development of innovative online and mobile payments.

In the UK the Competition and Markets Authority ruled that from January 2018 the nine biggest banks should allow licenced startups to access their data using standards and systems created by Open Banking Limited, a non-profit created especially for the task.

By January 2020 more than 200 providers had enrolled, including consumer credit firms who use the system to do affordability checks and verification.

What are the benefits?

It’s all about time saving and accurate record keeping. Imagine the benefit if you were able to link your accounting platform with your business account. You’d be able to send out payment reminders and keep records up to date, investing less time and money in making and receiving payments.

Once again, financial integration isn’t a new concept in the world of expense management. Our expense management app ExpenseOnDemand lets expense management data flow seamlessly through the business by integrating with the major accounting packages used by SMEs – Sage, Xero, QuickBooks, and Tally. It’s proven technology and eliminates manual tedium and wasted time from admin tasks.

Opening up the whole of your finances to third parties is an opt-in process, and that means it’s possible to opt out too, leaving you in control on behalf of your SME.

Remember this

It’s also worth remembering that everything we do is on an evolutionary path, carved out by developing technology. New opportunities come along all the time, and whilst they might seem intimidating when they arrive, they eventually become second nature.

Getting money from an ATM once seemed alien, but is now commonplace, which caused the dwindling of queues in bank branches.

In their turn ATMs and their contents are now becoming less important than they once were, being replaced in the financial firmament by cardless payments, which will, in their turn, increase in importance when their spending limit increases.

Open Banking is just another option for financial management made possible by the power of technology – and worth investigating on that basis alone.

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The writer has founded?ExpenseOnDemand?with a vision to enable companies to lead a paperless and a hassle-free business process by offering a smart, simple, & intuitive expense management solution.

Sunil NIGAM?bolstered the technology base & aced the business model to make solutions affordable to everyone – at $1/user/month, making it the most trusted cloudbased application by SMBs of over 96 countries..and perhaps the best expenses app in the universe!

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