Open Banking Offers Big Business Opportunities to Small Firms
Open Banking is set to revolutionise bookkeeping, offering to small businesses some opportunities that previously have only been available to bring firms.
Cloud accounting software platform Xero is on the forefront of the changes, promising small firms that they will be able to grow and run their businesses more effectively.
Open Banking is set to be introduced for all Xero customers from September 2019, so we thought that we would take an in-depth look at the changes and how they can benefit small and medium sized businesses.
What is Open Banking
Open Banking was introduced by the Competition and Markets Authority (CMA) to generate more competition in the banking and financial services.
The banks, they noticed, were sitting on hordes of useful information stored in peoples' banks accounts, but weren’t doing enough to innovate and create exciting new financial products and services.
To combat this, the CMA introduced a regulatory change which will force major banks to open up their systems and share bank account information with regulated businesses.
This means that, with permission, third-party software companies can access a person’s bank account information and use it to create innovative information-based products and services.
Some applications for individuals include budgeting apps that automatically import and analyse your spending habits and apps that display all of your accounts with different banks in one place.
For Xero customers, Open Banking means that the software will automatically import up-to-date bank account information directly into the Xero feed.
To ensure that your precious bank account data is secure, all participating businesses need to pass strict security tests set by the Financial Conduct Authority. Customers will also need to give their permission before a bank will share their information with a third party.
What are the benefits for small businesses?
Open Banking allows for the highest level of integration between information stored in bank accounts and accounting software.
This means that small businesses have instant access to their most up to date information, making it easier to stay on top of their financials. It will also eliminate a number of processes that previously had to be performed manually and speed up bank reconciliations.
The other key benefit of Open Banking for Xero users is that it will improve the business-accountant relationship. With Xero and Open Banking, your accountant will be able to focus less on unimportant financial administration tasks and spend more time adding real value for your business.
And this is only the start. In the future, we expect Xero to experiment with some exciting new products enabled by the Open Banking scheme.
Want to learn more about Xero and Open Banking, speak to a member of the Cloud Accountant team today. Call: 0808 281 0303.