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Supporting SMEs Q3 2022

How open banking is helping the UK’s small businesses improve their cash flow

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Charlotte Crosswell

Chair And Trustee, Open Banking Implementation Entity (OBIE)

Barely two years on from the Covid-19 pandemic, small businesses in the UK are facing a range of critical challenges, some of which are overcome through open banking.

Rising energy costs, soaring inflation, overdue payments, changes to the tax regime, or a high employee turnover urgently need addressing if the UK is to remain an economic world leader. Providing businesses with the tools to improve business efficiency and productivity has never been more important.

A game-changing tool

By placing transaction data back into the hands of businesses and consumers, open banking has helped thousands of UK small businesses to become more efficient and make better decisions through access to better financial products and services. The latest figures show that there are more than six million regular users of open banking in the UK. 

The Open Banking Implementation Entity (OBIE) is at the forefront of creating open banking software standards and industry guidelines and aims to drive competition, innovation, and transparency in UK retail banking. Our latest open banking impact report highlights the significant benefits open banking provides through cloud accounting.

Respondents reported that the technology provided them with better insights into business performance.

Outstanding feedback

The report found that through cloud-based software, businesses can manage basic accounting tasks faster and more efficiently — including managing cash flow or issuing invoices — by supporting cash flow planning and streamlining business administration. Open banking is integral to this as it allows companies to connect their bank account and import real-time transactions, giving SMEs greater visibility and control over their business performance. 

More than 900 SMEs were interviewed, with an overwhelming 77% reporting that open banking had provided them with better visibility of their financial position. Similarly, respondents reported that the technology provided them with better insights into business performance (73%), improved decision-making (75%), and managing overdue payments (63%). The statistics were positive when it came to the value of open banking in helping the firms to improve business efficiency (82%) and cut costs (59% had delivered internal savings and 64% external cost savings). 

More potential ahead

In short, open banking gives SMEs new tools to help them become more resilient, productive, and profitable. By unlocking the power of their data, businesses have real-time insights into their performance and tools to support their success even through the challenging economic climate ahead.

While it is encouraging that 50% of UK SMEs are reaping the benefits of open banking, there is still more that can be done. It is vital to maintain this momentum and support the remaining 50% to seize its full potential.

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