If you’ve never heard of open banking before, the title of this blog might confuse you a bit. But fear not! All will be revealed by the end. As of the 14th of this month (just 4 days from now), new EU standards will come into effect that change the way banks connect to accounting software platforms, under something called open banking. But what exactly does that term mean, and what does it mean for you?
What Is Open Banking?
Open banking is a fancy financial service term that essentially gives you a secure way to grant your providers access to your financial information. It calls for greater financial transparency to account holders, and mean you will be able to securely choose who will have access to your bank account information electronically. Specifically, which online companies and accounting software can access it.
Open banking was first set up by the Competition and Markets Authority on behalf of the UK Government, with the aim of bringing more competition and innovation to the financial services industry. More choice, greater control and all-round higher quality of service. What’s not to love?
Open banking also takes advantages of some of the better innovations of technology, bringing it a step ahead of previous solutions. Now, banks are obligated to provide these third party providers (think accounting software etc) access to their customers’ accounts using open APIs (in English, that’s Application Program Interface). This gives customers more control over which businesses have access to their account data, and even for how long. And it’s all governed and regulated by the Financial Conduct Authority, so you can be confident in using it.
What Does It Mean For You?
Put simply, open banking allows bank customers (both consumers and businesses) to use third-party providers to manage their finances for them. This in itself is not a particularly new concept, but open banking gives you an extra layer of security and comfort when dealing with something as sensitive as your finances. But on top of that, open banking also brings some pretty great benefits to you as a business owner, including:
A Clear View Of Your Finances: Open banking allows you to see all of your finances in one place, without the need for multiple applications, or even multiple tabs open on the go! This will make it much easier for you to budget, find the best deals and shop for the financial products and services that suit your needs, and instantly choose which to use and give the provider access in a few quick clicks.
Quicker, Easier Payments: We all know how frustrating it can be to make payments, especially if you have a lot to get through in one go. With open banking, you can make payments directly from your bank or building society.
More Choice: Open Banking could transform the way you use price comparison websites: if you choose to give a regulated price comparison website access to your account information, you’ll be able to get results based on what you actually spend.
More Security: with open banking, you will never be asked to share your password of login details with anyone other than your own bank or building society, and even then it’s under very strict control.
More Control: In Great Britain and Northern Ireland, banks are required by law to allow regulated businesses to access their customers financial data ONLY if the customers have given their permission for it. This, combined with the quicker approval processes, gives you more control than ever over who can access your financial information at any one time.
At Safe Hands Bookkeeping, we work hard to keep up to date with all the latest tech and regulations, including open banking. We know this will have an impact on most of our customers, and most business owners in general, since it will alter how their accounting software connects to their bank account. This means you will need to be ready for the changes, and know what to do when it comes into effect. If you’re not sure, we would love to be able to help. Just get in touch with one of the team today and we’ll be glad to give you some advice. After all, it’s our job to make sure your finances are in safe hands!