Increased accuracy of our underwriting process by using real-time financial data, allowing customers to adjust their monthly repayments and applying for an increased credit limit via a self-service function are some of the many benefits coming from our integration with True Layer’s Open Banking API.
Open banking is set to revolutionise the SME sector over the coming decade, yet only 60% of small business owners know about Open Banking and the difference it could make to their businesses. In this article, we reveal what is Open Banking technology and how it could benefit your business.
What is Open Banking?
Open Banking refers to technology and legislation that allows licensed third-party developers to connect your banking details if you provide them access.
What this means is that when your bank uses application programming interfaces (APIs) to establish an Open Banking system, you’re able to connect one or more banking services to centralised technology, and as a result, view your financial health and make payments all from one account.
Its introduction as part of UK legislation is in support of encouraging financial competition and stronger technology in finance – but during this current period of difficulty, open banking can also help small businesses keep track of their finances with far more ease and make important decisions that need to be made during COVID-19.
1. Save customer time
Because funds are all held in one digital location, it becomes easier to track spending, income, and general financial health. Businesses can review their accounts quicker and move their money between accounts with less time spent on managing individual banks and cards. Accordingly, businesses can move quickly in response to the constantly changing situation that COVID-19 has seen emerge – allowing them to make decisions faster and protect their finances better.
2. All under one administration
Regardless of your Open Banking provider, your account details will all be shared under one roof. This means that businesses can coordinate with their bank more consistently and provide a clearer view of their financial state, while the bank can offer more accurate services and advice based on the new data they have available. Communication is key while finances are uncertain and having that extra speed and clarity from your bank is a valuable tool for protecting your employees, customers, and your business.
3. Faster lending
As a result of the digitisation of banking data as a necessary step in developing Open Banking, it becomes possible for lenders and loan applicants to communicate more quickly. Rather than going through time-consuming and, under current circumstances, challenging processes of going to an office and providing ID and other financial details to apply for a loan, businesses are instead able to grant lenders access to the required facets of their financial status and secure approval for their loan within seconds. This can save a great deal of stress and concern if you’re trying to acquire additional funds to respond to a cash flow problem in a short amount of time.
4. Tailored offers from lenders
Even after loans are granted, if businesses provide lenders with a degree of access to their financial state, lenders will be able to review it immediately and provide support and tailored offers relating to that and future loans on essentially a real-time basis. This means that the relationship between the borrower and the lender becomes more efficient, with more tailored data being offered at a quicker rate. This is critical during difficult periods such as the months to come as businesses will be able to quickly and more readily be able to identify and secure the finance they need, when time is of the essence.
5. Customer control over personal data
The greatest concern with Open Banking is often the measure of control a business has over its data once it’s connected to third parties via APIs. In actuality, however, Open Banking offers more significant fine-tuning of data protection than traditional banking, as customers can immediately review and control what data is shared and with whom from the security of a single source. This can provide assurance of security, which for many is one of the biggest concerns when using open banking connections.