Open banking payment technology is booming in the UK, as the total number of payments more than doubled last year to 68.2 million, up from approximately 25.2 million in 2021.
The stark increase in adoption and usage is credited to small and medium-sized businesses (SMEs) embracing the technology.
According to Open Banking Limited, over 750,000 SMEs have now connected their business bank accounts to third-party open banking services, in order to help manage cash flow and reduce the cost of transactions.
Open Banking Limited is a body set up by the Competition and Markets Authority (CMA) to force the nine leading current account banks to share customer data.
“It is encouraging to see a continued and steady increase in the adoption of open banking products and services, particularly by the UK’s small firms which are seeing tangible benefits from real-time business insights offered by open banking data,” said Marion King, Chair and Trustee at Open Banking Limited.
Continuing, King remarked that it “is also exciting to see the expansion of services in key areas such as borrowing and financial decision-making, empowering people to make better informed choices about managing their money, which is crucial as we face an increased cost of living.”
What is Open Banking and Why is it Important for Small Businesses?
Open banking payment technology allows third-party financial service providers access to consumer banking, transactions and other financial data from banks and non-bank financial institutions.
Those who have connected their bank accounts to an application programming interface (API) enable permitted organisations access to their financial information.
For example, small businesses often give consent for online accounting software providers to connect to their business bank accounts, via open banking.
This can help streamline and aggregate a company’s financial information, automating the accounting process and providing entrepreneurs with real-time business data.
Adoption of open banking creates significant efficiencies for businesses and consumers alike, and has been heralded as the technological innovation best placed to reshape the banking industry for the good.
Why is Open Banking More Popular with Businesses Than Consumers?
Thus far, the benefits of open banking are much more profound for businesses than consumers.
This has been reflected in the 2022 data from Open Banking Limited, who reported that 16% of British businesses have adopted the technology, compared to 11% of consumers.
There are currently 159 regulated companies with live open banking enabled products, streamlining processes – across a range of services – for over three quarters of a million SMEs.
Open banking products for consumers still have a relatively limited reach, focussed on services within the space for budgeting and payment initiation services.
Later this year findings are set to be released from the Treasury and financial regulators, following an examination of extending open banking to other financial products, such as mortgages and healthcare.
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