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Open Banking held back by lack of trust among small firms

With today marking two years since the implementation of the Second Payment Services Directive (PSD2) in the UK, new FSB figures highlight the minimal impact of the legislation to date.

PSD2 paved the way for Open Banking - a set of interfaces that give business owners and consumers the option to seamlessly share financial information with other banks, finance providers and trusted third parties. Doing so effectively should help to assist better cash flow management, the securing of improved deals on financial products and services, and reduction of recurring costs, such as utilities.   

An FSB survey of more than 1,000 members finds that fewer than one in seven (15%) small firms are currently sharing their business bank account data electronically with third parties. A big share (87%) do so to update accountancy software.   

Around two thirds (65%) of small firms say they would not consider sharing their banking data with other financial services providers electronically. Among this subsection of firms, four in ten (43%) believe that sharing banking data in this way is unsafe, while a similar proportion (37%) are ‘unsure about the benefits’ of such activity.

The overwhelming majority (85%) of smaller business owners who would not consider sharing their business bank account data with other financial services providers electronically are ‘wary’ about doing so.

“We’re two years on from the introduction of Open Banking but very few small firms have reaped any benefit from it,” said FSB National Chairman Mike Cherry. “We’ve always said that - done right - the benefits of Open Banking will be huge. Giving small businesses the ability to integrate cash flow, invoice, payroll, utilities and tax data in one place means giving them the ability to identify new efficiencies. And by sharing that big picture with trusted experts, gains should be amplified.”

“However, the financial crash casts a long shadow,” Cherry continued. “A lot of small business owners still don’t trust lenders to do the right thing. This was always going to be a hard sell - one moment we business owners are told to do all we can to protect sensitive data, the next we’re being told it’s safe to dish it out.”

Cherry called for a concerted effort from the government, banks and the FCA to ensure that Open Banking application programming interfaces are absolutely watertight, and small business owners are fully aware of the benefits of using them. Key to this is awareness-raising, and clarity around who is responsible for cybersecurity breaches and protections for smaller firms.  

“The incoming head of the FCA should make this a top priority for their tenure,” Cherry concluded. “There’s still time yet for a small business banking revolution.”


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