It didn’t generate much attention, but last month marked the second anniversary of what some have called the biggest shakeup in the UK’s banking system for half a century.
January 10th, 2018 saw the launch of Open Banking, an initiative designed to bring greater transparency to the banking industry and promote more freedom of movement for both retail and business bank customers. Open Banking allows customers to access, move and use their banking data in any way they like.
Want to shop around for growth finance? Here’s your past five years’ bank data to show a range of prospective lenders. Want to leverage your business banking relationship to get a better energy tariff? Right, this way. Want to transfer your surplus business balance into a high yield account for a few weeks? Click here. And by the way, you’ll be able to do all this through a single website or app.
Breaking down barriers
It’s a fairly simple construct: The UK’s new regulations require banks to use open application programming interfaces (APIs) to allow different software to communicate with each other repeatedly over time based on the permission obtained from the user of the software. Information is made available in a standardised way that allows external applications that have permission to access that information to interpret and use that information for their own purposes.
Through this ‘open-banking,’ mechanism customers can readily share their financial information with other providers if they choose to do so. Open APIs will also make it much easier for customers of big banks to transfer their accounts, manage payments, and conduct transactions through other banks and non-banks, reducing barriers to switching.
The main beneficiary of this trend so far has been the so-called fintechs – tech-driven banking providers offering app-based services to the next generation of banking customers. From Monzo to Revolut and Starling, fintechs have attracted a lot of attention, as well as lots of smart people keen to work in the brave new world. From shaking up how people pay at the counter to opening up new services in payroll, tax management, and financial planning, fintechs are shaking things up.
Brave new world
So does Open Banking mark the beginning of the end of the traditional banks’ dominance? Not necessarily. After all, high street banks’ traditional strength has not centered on the ability to come up with new and exciting propositions for customers. However, the banks do have the infrastructure, the lion’s share of customers, as well as consumer trust and brand recognition. Fintechs can only look at that with envy.
As for the immediate future, we’re likely to see more collaboration between the old and the new kids on the block, marrying the fintechs’ innovation and energy with the strength, reach and reliability of the established banks to create a more competitive market.
So – in theory – your business should get access to funky and convenient new banking services but still retain the assurance and trust of their established banks.
How this shakes out will have an impact not only on banks but other industries and customers – and if it’s managed well, it could benefit everyone. The fact that the UK is leading the world in opening up its banking market is also great news for those considering setting up here, as the range of products and services is growing every day.
So, whatever you need, we can help. Whether it’s registering for a bank account, enrolling employees into company pension schemes or taking the strain of your accounting needs, our experience with growing businesses in the UK is second to none.
So, if you’re ready to take the plunge and tap into what could be a great year ahead, then get in touch.