Open banking provides unique opportunities for small business

afr.com:

A new paradigm in financial services called open banking is improving the lives of small business owners and their customers. It is making it easier for small firms to win new customers, run their operations and manage their finances.

We are just at the start of the open banking revolution, which emerged first in the UK, before being introduced in Australia. Now is the time for smaller enterprises to explore all this new regime has to offer.

Open banking is revolutionising the financial services space. iStock

At the moment, open banking allows banks and other financial services businesses to send customer data, with their permission, to other businesses.

For instance, a firm might ask its bank to share its financial information with a new cash flow management app. Or a business might request its financial services providers to send its data to a fintech with new technology that analyses this information to produce insights for the company.

Key to this is the Consumer Data Right, which is a set of rules that give businesses and consumers more control over their information. It makes it easier for them to share information with other businesses and quickly compare, and switch between, different products and services.

Although CDR is focused on banking now, it will be extended to other industries in future.

Small businesses’ ability to access CDR data, with their customers’ consent, and receive enriched insights opens up a new world of possibilities. It also increases trust, transparency and competition.

“Small business customers will be able to find better deals and more easily switch between product providers. For small businesses, that means lower barriers for customers wishing to switch providers and easier onboarding