A lot of people are talking about open banking right now.
In fact, 2021 has been called the Year of Open Banking.
At AccessPay’s Dispelling The Myths Around UK Payments event in Manchester, Nadeem Haque from Barclays gave us some fascinating insight on this topic.
Drawing on his expertise, we ask: what is open banking and why does it matter – especially when it comes to UK payments?
What is Open Banking?
Let’s start with the basics. What does open banking mean, and what is its definition?
Open Banking is simply a secure way to give service providers access to your financial information.
It’s an innovation that allows third parties to build apps and services around financial institutions like banks. The idea behind this is that your customers will be able to pay for products and services entirely through your app or website.
How Open Banking Works
Here’s how it would work in practice.
Say you’re a customer looking for holiday insurance. Open Banking would let a price comparison site access your banking information, so it can tailor the products it suggests to what you can afford and what you typically spend.
And think of the benefits this tech could deliver. Those in the know are already making noise about how it could allow you to view all your bank accounts in one place. This could make it easier to budget as you have a clearer view of how much money you have.
Then there’s the obvious benefit that payments can be made in seconds, all from one place, making everything more convenient.
What Does this Mean for Customers?
This is revolutionary for consumers, giving them greater control of their finances.
A PwC report says that 39% of bank customers would share their data with other banks and third parties like Amazon if they got certain benefits e.g. the ability to compare tailored product offerings. But a piece on Finextra says that only 28% of UK adults have heard of open banking.
Basically, there’s a knowledge gap when it comes to open banking and it’s up to businesses to get customers on board.
Open Banking Business Opportunities
Is this worth the effort though?
Yes. There’s clearly space in the market for it and businesses live or die by their ability to please customers.
It’s ideal for finance and treasury professionals too. You could do tasks like invoicing from your phone in seconds with open banking. You could also see multiple bank accounts in one place and this has serious benefits. Combine this with automated tech like Cash Management treasury software and tasks like reconciliation get much easier.
How Safe is Open Banking?
For all the upsides, are there any downsides? The obvious area we need to look at is security. Figures collected by the UK government show that 39% of businesses suffered a breach or attack between March 2020 and March 2021. This rises to 64% for larger organisations, so safety really is a massive issue.
Despite what people might believe, it’s clear that open banking has diamond-grade safeguards. Any data used for this purpose is encrypted with the most advanced security measures.
Anyone using open banking tech will still have to play by GDPR rules too. The penalty for breaking these can run up to 5% of a company’s global revenues, so any business you deal with has plenty of reasons to play it safe.
Leading the Charge
We were lucky to have one of Barclays’ experts, their Director of Global Cash Management Nadeem Haque – who contributed to our latest eBook – at the event.
Barclays is leading the way here; they were one of the first UK banks with an open banking app. It lets customers view account data from other retail banks without giving out names and passwords for these accounts.
Despite doubts, open banking is already here and it’s changing how customers and businesses handle cash.