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Will Open Banking help small businesses grow?

Turner Little - banking small business

Open Banking is here, and it is potentially the most seismic change for financial services in a generation. Since reforms were introduced in January 2018 regarding financial data sharing, Open Banking has transformed the financial services market. Access to innovative, disruptive, easy-access financial services will profoundly change the way banks and their customers work together.

For small businesses, it means that for the first time more options are available to them to manage their finances. Instead of being restricted to a select few services provided by high street banks, small businesses can use tailor-made, specifically honed financial assistance in the form of apps, products, alternative lending and new tech platforms.

How will Open Banking affect small businesses?

We’re currently seeing the transition from traditional business banking to Open Banking. And while it is still early days, it will deliver a profound sea-change in financial management, on a personal and business level.

Most UK small businesses are yet to grasp the opportunity available to them, but research from PricewaterhouseCoopers (PWC) indicates a steadily increasing willingness to use Open Banking. At the moment, 40% of small business owners are happy to share their financial data for Open Banking purposes. By 2022, this will increase to 72% as SME owners grow their understanding of the benefits available to them. This means that by 2022, 4.8 million small businesses and 32.7 million consumers will be utilising Open Banking to manage their finances.

The propositions that will be created and offered by Open Banking to small businesses include:

  1. Bespoke, tailored lending based on an analysis of the SME’s account data.
  2. Improved cash flow management.
  3. Integrated tax and accounting services.

Transformative financial management

Open Banking is the term used for a set of reforms implemented in January 2018, following calls for reform from the Competition and Markets Authority (CMA). It essentially forces UK regulated banks to allow customers to share financial data with other providers that offer apps or banking.

This is subject to the provider being authorised, and the consumer or small business giving permission. It’s hoped that this will end the monopoly of the traditional banking sector and improve financial management services for both consumers and businesses. The authorised parties are regulated by the Financial Conduct Authority (FCA) and are on the FCA Register or the Open Banking Directory.

Opening up the market will improve small business finances

In 2018, there were 5.4 million small businesses registered in the UK, making up 96% of the total businesses in the country. This is a huge number of small businesses forming the very backbone of the UK economy.

Challenges faced by microbusinesses and SMEs include access to financial management, services and products. With few staff and fewer resources, often time is just not available for financial analysis. This can lead to small businesses missing out on assistance, loans, information and general financial help that could be critical for survival.

Statistics show that almost half of small businesses that failed to secure the full amount they wanted from a business loan simply gave up, cancelled growth plans or put their business on hold. More than two-thirds are willing to give up growth plans rather than borrow money.

James Turner, Managing Director of Turner Little Limited, says: “The general reluctance to access financial management assistance is one of the reasons behind the introduction of Open Banking. Small businesses will benefit from more competitive products and services within the financial sector. Open Banking is becoming a very exciting opportunity that could help to boost the country’s position on the world stage”.

“However, it can seem low priority for small business owners who are dealing with the day to day immediacy of running a business. They will begin to see more products and services opening up, even if they are not aware of the changes in the background. This can help small businesses in many ways, from speeding up access to cash, funding and loans, to assisting with realistic plans for growth. From expenses tracking to tax assistance, there are already loads of apps and services available that small businesses and sole traders should be aware of. These innovations are specifically designed to help real-life problems faced by small businesses and are provided by Fintech innovators”.

“Fintech and Open Banking have the power to give small business owners full control of their financial future. We are in the early days of this transformative time within the financial sector, but through adoption of innovative solutions, small businesses will be able to further support the country’s economy and thrive.”


About Turner Little
Founded in 1998 in Yorkshire, UK, Turner Little is a specialist UK and offshore company formation, banking and corporate services provider. Our services include company formation, UK and offshore banking, asset protection, credit correction, trademarking and trusts. Other services include Internet services, mail forwarding, wills and probate. Turner Little’s vision is to offer the best possible service, together with market leading products.

Turner Little and its affiliates do not provide tax, legal or accounting advice. Material on this page has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.