# Isn’t It Time Open Banking Delivered for Businesses?
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-06-20
Category: BANKING
Category URL: https://financedigest.com/category/banking
Meta Title: The Impact of Open Banking on UK Businesses
Meta Description: Explore the impact of open banking on UK business banking, from faster lending decisions to improved cash flow and resilience. Learn more here.
URL: https://financedigest.com/isnt-it-time-open-banking-delivered-for-businesseshtml

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#### _By_ **_Hugh Scantlebury,_** _Founder and CEO at_ [_Aqilla_](https://www.aqilla.com/)

_Open banking was launched in the UK in October 2015. In August 2016, the Competition and Markets Authority ruled that the nine biggest UK banks must begin allowing licensed third parties direct access to their data. Open banking regulations finally came into effect in January 2018, tying in roughly with the EU’s second Payment Services Directive (or PSD2). [Open banking](https://www.financedigest.com/open-data-represents-the-biggest-challenge-to-banks-in-a-generation.html "Open data represents the biggest challenge to banks in a generation"), however, differs from PSD2 as it requires banks to share their data in a standardised format, whereas PSD2 does not. Today, open [banking is managed in the UK by a non-profit called Open Banking Limited and enforced by the Competitions and Markets](https://www.financedigest.com/in-a-rising-market-are-banking-outsourcers-pulling-their-weight.html "In a rising market, are banking outsourcers pulling their weight?") Authority._

**Introduction**

Open [banking has revolutionised how UK consumers access banking and financial](https://www.financedigest.com/financial-crime-is-the-chink-in-the-banks-armour.html "Financial crime is the chink in the banks’ armour") services. Its most popular uses include savings and investment, personal finance management, and credit rating improvement facilities — all of which could also be incredibly useful to business [banking customers](https://www.financedigest.com/communicating-with-the-customer-is-the-future-of-mobile-banking.html "Communicating with the customer is the future of mobile banking").

Open banking could [deliver faster](https://www.financedigest.com/you-cant-get-faster-than-that-spring-statement-update-delivered-digitally-as-it-happens-with-app-driven-technology.html "‘You Can’t Get Faster Than That’ – Spring Statement Update Delivered Digitally As It Happens with App-driven technology") business lending decisions and make it cheaper for companies to borrow — both of which are more important than ever, given current economic uncertainties. Open banking could speed up the [process of making and receiving payments](https://www.financedigest.com/are-your-payment-processes-in-cheque-for-the-new-legislation.html "ARE YOUR PAYMENT PROCESSES IN CHEQUE FOR THE NEW LEGISLATION?") (including cross-border payments) — enabling supply chains to function much more efficiently. In so doing, it could help companies improve their [cash flow and long-term economic resiliency](https://www.financedigest.com/supporting-a-fair-and-resilient-society-by-protecting-access-to-cash.html "Supporting a fair and resilient society by protecting access to cash ").

**Missing a trick?**

Yet, despite all these potential advantages, open banking has not [delivered for the UK business](https://www.financedigest.com/pizza-firm-dp-eurasia-delivers-profit-rise-evaluating-russian-business.html "Pizza firm DP Eurasia delivers profit rise, evaluating Russian business") community. So, what’s going on?

Right now, banks don’t seem in a rush to develop or market open [banking services](https://www.financedigest.com/20-billion-in-bank-service-fees-are-you-overpaying.html " Billion in Bank Service Fees: Are You Overpaying?") to businesses. And business leaders still have a degree of scepticism. As open [banking has remained mainly in the consumer](https://www.financedigest.com/30-per-cent-of-uk-consumers-would-use-amazon-google-facebook-or-apple-for-banking-services.html "30 Per Cent of UK Consumers Would Use Amazon, Google, Facebook or Apple for Banking Services") arena, it’s difficult for them to see how open banking could help; it just seems too consumer-focused and unable to scale to larger, more complex transactions. They also believe it is driven primarily by [challenger banks](https://www.financedigest.com/big-banks-can-be-challengers-too.html "Big banks can be challengers too"). This puts off [businesses that use the big](https://www.financedigest.com/smishing-is-a-new-virus-plaguing-big-business-conversational-commerce-to-the-rescue.html "‘Smishing’ is a new ‘virus’ plaguing big business – Conversational Commerce to the rescue!") high street names.

Many also worry about sharing their financial data with third parties even though the FCA regulates all open banking service providers, and many businesses already [share data with their accounting](https://www.financedigest.com/the-sharing-economy-whats-in-it-for-accountants.html "THE SHARING ECONOMY: WHAT’S IN IT FOR ACCOUNTANTS?") software providers.

**Setting the record straight**

But I’d like to offer some reassurances on these points. First, [open banking](https://www.financedigest.com/barclays-private-bank-opens-new-office-in-verbier-switzerland-for-2022-23-ski-season.html "Barclays Private Bank opens new office in Verbier, Switzerland for 2022/23 Ski Season") is very safe. It uses [Strong Customer Authentication](https://www.fca.org.uk/consumers/strong-customer-authentication) (SCA) and, as set out in law, providers are only allowed to access the data needed to deliver their service. Open banking also uses identity access management, the principle of minimal privilege access, single sign-on and advanced user authentication. Everything, in fact, you might have heard of in the context of zero-trust IT security. Open banking services for [businesses are also likely to use biometrics to further enforce strict identity management](https://www.financedigest.com/5-practical-ways-to-manage-your-business-expenses.html "5 Practical Ways To Manage Your Business Expenses") — just like consumer applications.

It’s true that banks like Starling and Monzo have thrived in the more competitive market created by open [banking — and particularly because of their ability to capitalise on the API technology](https://www.financedigest.com/6-technology-trends-banking-2019.html "6 Technology Trends for Banking in 2019") that underpins it. But all the major UK high street banks are also subscribed to open banking, so you don’t [need to have an account with a challenger bank](https://www.financedigest.com/banks-need-to-become-a-lifestyle-brand.html "Banks need to become a lifestyle brand") to take advantage. In fact, over 1,700 banks worldwide have signed up to open banking.

It’s also true that banks across the board have been slower to offer business-related open [banking services](https://www.financedigest.com/britain-seeks-to-boost-banking-services-from-fintechs.html "Britain seeks to boost banking services from fintechs"). They’ve focused on using the platform to increase [automation across consumer accounts](https://www.financedigest.com/5-common-mistakes-around-accounts-payable-automation.html "5 Common Mistakes Around Accounts Payable Automation"), reduce running costs, and sell more of their services. But I believe that with the correct marketing, education, and product development [businesses will want to embrace open banking](https://www.financedigest.com/credit-agricole-launches-china-ma-and-investment-banking-business.html "Credit Agricole launches China M&A and investment banking business") more wholeheartedly in the years ahead.

The basis for this optimism comes from the increased use of Making [Tax Digital](https://www.financedigest.com/self-employed-taxpayers-and-making-tax-digital.html "Self-employed taxpayers and Making Tax Digital") (MTD). All VAT registered companies in the UK are now required to file digital VAT returns — and a growing number are doing so through a direct data-sharing connection between their [bank account](https://www.financedigest.com/are-banks-ready-for-the-new-accountability-regime-in-2016.html "ARE BANKS READY FOR THE NEW ACCOUNTABILITY REGIME IN 2016?") and HMRC. If they’ve seen that MTD can work smoothly and securely in this way, I think they’ll be much more likely to try a new open banking application.

**Payment initiation services**

[Payment initiation services powered by open banking](https://www.financedigest.com/5-ways-banks-can-compete-in-payments.html "5 ways banks can compete in payments") could be a game-changer for businesses. They’re faster than direct debit and easier than BACS transfers, and customers don’t need to manually enter their account number or sort code. Until recently, payment initiation services focused primarily on the consumer market or payments between individuals (P2P payments). For example, they might help groups of friends split a bar or restaurant bill without that person (who always does it without fail) getting out their calculator.

But they haven’t been viable in a business context; they currently [struggle in situations where companies need to pay hundreds or even thousands of suppliers](https://www.financedigest.com/french-energy-suppliers-will-let-struggling-bakers-renegotiate-contracts-le-maire.html "French energy suppliers will let struggling bakers renegotiate contracts – Le Maire"). The market, however, looks poised to change with the growth of automatic and conditional payments. This type of payment initiation service could potentially [manage outgoings across supply chains and even pay](https://www.financedigest.com/with-the-right-active-manager-you-really-do-get-what-you-pay-for.html "With the Right Active Manager, You Really Do Get What You Pay For") employees. For this reason, I see business banking [payment initiation services as one of the most significant future](https://www.financedigest.com/the-future-of-biometrics-in-payments.html "The Future of Biometrics in Payments") growth areas for open banking.

**Conclusion**

When people discuss open banking, you frequently hear them use the word _democratisation_ to describe its benefits. And that’s certainly been true of consumer banking. But open banking has the potential to [bring massive change to business](https://www.financedigest.com/how-to-bring-business-and-charities-together-through-events.html "How To Bring Business And Charities Together Through Events") banking customers too. Yet it feels in many respects that we’re only at the start of this journey. Businesses seem more amenable to open [banking than ever before, so it’s time for banks, application developers and fintechs to seize the moment and deliver some genuinely revolutionary open banking business-based services to market](https://www.financedigest.com/market-stress-indicators-react-sharply-after-u-s-bank-failures.html "Market stress indicators react sharply after U.S. bank failures").


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