Lets Talk Open Banking

With Glenville Walker Consulting having recently launched its Banking Review Service, provided by Alistair Howard and Simon Robb, these regular articles / posts are designed to keep you abreast of the latest news in the Banking Sector, and provide some thoughtful pointers as to why you might want to periodically review your banking arrangements.

Open Banking

In recent weeks there has been a fair bit of publicity about “Open Banking” and what this means for the major existing Banks and their customers – which is, of course, all of us. So, we at Glenville Walker Consulting thought it might be useful to briefly explain what Open Banking is all about, what might change for the Business Bank Account operator, and how that might improve things for business in the future.

What is Open Banking?

Open Banking is all about sharing Data. In 2016 it was considered that, in the modern era of information and “Big Data”, it was too easy for the large established banks to hold onto their customers. This was because possible competitors couldn’t access information (data) about customer transaction patterns.

• Think about your Nectar or Clubcard – they give retailers huge amounts of information about you and are massively significant in how your local store is set up, the offers you receive and so on.

Open Banking is all about the customer being able to get the bank to openly share their transaction data so that other service providers can see what you do and offer you / your business alternative services which you previously relied upon your bank for.

• An easy example to follow is Foreign Exchange transactions. By opening up your transaction history, a specialist provider can see your data, and may be able to offer you an alternative (at a lower cost). At the moment, you have to provide all the detail – in the future, they can see what you want them to, so they do all the leg-work.

So What Might Change for the Business Account Holder?

What will really change for any business (as we all have to have bank accounts) is who does all the work! If the business agrees to open its bank data files, then almost all of the core data a service provider needs will be available for them to assess the opportunity and the scale of any requirement. They should also be able to accurately assess the value to you of their product – i.e. how much cost saving their might be for your business.

Now, of course, this will ultimately probably need to be verified, and you may have to provide some evidence to support everything – but this would only be at the back end.

• If you are not convinced, think about an old-fashioned mortgage application. You have to provide payslips, proof of income, proof of previous payments, bank statements, ID and so on. It could take ages!
• Credit Referencing (i.e. Credit Scores) have improved things, in most cases, but you still did a lot of the work.
• Under Open Banking, the aim is that a lot of this information will be available, securely, and you will have much less to do – and only at the finalization stage (as opposed to the application stage).
• Everything will be governed under the new GDPR rules, so the banks (as the holders of vital personal data) will have a huge responsibility to protect your data. In addition, Service Providers looking to offer you their products, will also have to protect your data – so it doesn’t appear that there will be a major increased data loss risk.

How will things Improve for Businesses?

It is probably unlikely that businesses will simply open up all their banking data immediately. No-one wants to be inundated with “new improved” offers and then have to spend hours sorting out the wheat from the chaff. However, if a business wanted to look at it’s Factoring services, then a couple of quick calls would probably achieve a great deal. You might simply tell an intermediary that you wanted competitive Factoring Proposals from new lenders, give your bank the approval to open up the data files, and let the competitors put their offers together.

Historically, Banks controlled virtually everything cash / payment / lending related. We all know that there is a growing number of Alternative Finance providers springing up – now they may be able to get the data they need without hassling you unduly!

At Glenville Walker Consulting, we think Open Banking should be cautiously welcomed. We understand only too well how busy every business man and woman is – anything that can make it easier to stay competitive and minimize cost has to be a good thing.

If you need any help or want further guidance upon how to make the most of this rapidly changing Financial Services market, or just review what you already have, please get in touch with Hazel Walker, Commercial Relationship Manager on 0151 305 9654 or hazel.walker@glenvillewalker.com