OPEN BANKING: SMEs
A BIG opportunity for small ll business Open banking is beginning to transform the back office for SMEs, but providers need to get their messaging straight, say Leon Muis, Chief Business Officer for YTS, and Lars Vonk, Founder of Zilverline We live in an information age – and a misinformation age. The coronavirus pandemic has received saturation coverage and comment across the world, with constant dissection and reinterpretation of the facts. Mistrust is very much a trend of our time. And it can be seen elsewhere, too – take ignorance around open banking, which is built on the sensitive area of private financial data. According to the UK’s Open Banking Implementation Entity (OBIE), three million businesses and individuals are using open banking services three years after they were launched in Britain and the EU… not exactly the whip-cracking speed of adoption that policymakers were hoping to see. Whether technology or psychology has held it back, it’s hard to say. But misunderstanding doesn’t help. A survey of around 1,000 business leaders in finance, retail and personal finance software, by Yolt Technology Services (YTS) late last year, found that, while the majority understood open banking to be a secure way to give providers access to an account holder’s financial information, 23 per cent wrongly believed it allowed companies to access the data, regardless of consent. Ironically, as the YTS report points out, the regulatory drive behind open banking
was explicitly about giving consumers more control over their financial information, not less. Consent is at the core. If a quarter of industries most affected by open banking don’t ‘get’ that, no wonder ordinary individuals and small business account holders aren’t falling over themselves to take advantage of it. The YTS survey was conducted in the two territories in which the company operates as both a payment initiation services (PIS) provider and an account information services provider (AISP) – the Netherlands and the UK. Its findings also showed uptake of open banking products and services to be higher in the former than in the latter, where confusion over consent was more widespread, perhaps demonstrating that providers need to be much clearer about the messaging. “There are many misconceptions about data privacy, when the fact is that privacy and security are absolutely embedded in open banking,” says Leon Muis, chief business officer at YTS. “Our Unlocking The Value Of Open Banking survey showed that’s one of the main barriers to leveraging open banking, so we must keep educating the market. It’s come a long way, from a few million API calls in 2018, the first year of open banking in the UK, to 700 million a month now, but has it delivered on its promise? I don’t think so.” YTS provides APIs for open banking,
with 600 now connected in Europe. One of its clients is Amsterdam-based Zilverline, which uses YTS to provide the API rails for its small-business accounting software, Jortt. Zilverline’s co-founder, Lars Vonk, agrees open banking has had a disappointing start, but he believes it has the ability to transform small businesses, especially in the back office. And the activity that’s currently being disrupted the most, and will continue to be in his opinion, is accounting. He says: “One of open banking’s promises was to improve security for customers, and PSD2 and open banking are delivering on that, considering that in the old days we were sending bank files to each other via email to share data, and I don’t think there’s anything less secure.” A recent survey from Ipsos MORI suggests that, since the COVID-19 pandemic started, around half of small businesses are, in fact, now using open banking services. Among those, Cloud accounting is top of the list, at 24 per cent, followed by cash forecasting, at 21 per cent. For both of these services, open banking allows immediacy and improved
Open banking is unlocking the door: But will the banks enable everyone to walk through?
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TheFintechMagazine | Issue 20
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