Open banking came out of a market investigation by the CMA into the supply of retail banking services to retail customers and to small and medium-sized enterprises (SMEs). The goal is that open banking will empower customers and small business by enabling them to tap into the expertise of third party developers and data scientists through secure sharing of banking transaction data. This could provide them with automated services and insights tools previously only available to big businesses. For a sole trader it could for example mean the difference between staying in the black and avoiding overdraft charges by automatically moving cash between accounts if there’s a danger of dipping into the red. Truly a new frontier for banking… driven out of the UK.
In the case of SMEs, there are huge opportunities for them to improve cash flow, tax and financial planning, unlock capital and possibly avoid debt, all by sharing data and being offered the right products and services for their business. Solutions from some of the UK’s most innovative fintechs have the opportunity to positively shake up the SME banking market. But will technological wizardry be enough? Or do we need to ensure that solutions are built to be user friendly and to consider the busy life of small business owners? Will small business owners adopt a solution unless it is made truly simple for them?
As a small business, we know the challenges that come with managing an organisation’s banking and finance. Whether it be the administrative headache, the time it takes to manage invoicing or our banking needs, we know that something needs to change. If the process around finance and banking was more transparent and products easier to compare, then we would personally benefit as small business owners. But within this we need to consider the cultural shift needed and the ease of use to ensure adoption.
So what is needed for small businesses to ensure open banking works for them?
The first aspect that would benefit adoption is an education programme for small business owners. We can bring some fantastic technical developments to market but without adoption, this shift will not occur. If we consider initiatives like auto-enrolment then we can see how millions was spent to educate organisations and end users on what was needed to shift a sector. I believe the same is needed for open banking. A strong education programme that highlights the opportunities for SMEs within open banking and addresses directly any concerns that they may have.
The other consideration is that the technical solutions need to be both user friendly and easy for the small business owner to adopt. One thing small businesses owners don’t have much of is time, and fintechs building products for small businesses need to be mindful of this. Many digital solutions have put all of their eggs into the basket marked ‘tech’ without allocating enough to the basket marked ‘user experience’. User experience as a term can feel somewhat dehumanising, but you could easily replace the word ‘user’ with ‘human’ or ‘person’. Essentially, ‘good user experience’ possesses the quality that, in addition to solving a problem, a product is convenient and pleasurable to use. With this in mind, the other critical factor is the need to test and refine products to ensure they are suitable for the end user.
We are working with the Open Up Challenge by Nesta to ensure that the innovative concepts that come through the process have UX considerations built in from the start. Open banking presents a true opportunity for SMEs across the country and marks an exciting milestone with the potential to both boost UK business and showcase the UK as a world leader in both finance and technology.