Is open banking the future?

Open banking is a global trend that presents opportunities for SME’s in customer experience and business finance. We are on the cusp of radical changes in the financial system that will increase the efficiencies of getting paid, making payments, and securing fairer access to capital. That means improved cash-flow, increased business productivity and better customer experience. Open banking is definitely a trend that we recommend keeping an eye on so that you can keep pace with and benefit from the changes that lie ahead. 

Xero recently ran a high-level panel discussion with UK experts Edward Berks and Louise Brett around open banking. The Connected Accounting team virtually attended the seminar and here are our key takeaways and a few additional observations.

What is open banking?

Open banking is as a safe and secure way for third parties to access your financial information. During the panel discussion Edwards (Xero), elaborated on this by saying that in the simplest sense…

“open banking will empower consumers and businesses to control their data and derive value from their data that is held by banks”.

Data is shared with service providers (pension, insurance, mortgage or loan providers) by secure API to streamline the way that services are accessed. This safe and secure sharing of data will open access to a wider range of new products and services that could help SMEs and consumers.

What are the benefits to SMEs?

Louise Brett (Deloitte UK) outlined opportunities such as easy access to credit or capital, significant reduction in administration (increasing productive work time), and deriving insights that matter. Xero is making use of the open banking opportunity and Edward outlined some of the improvements small business owners will start to see in the very near future:

  • Streamlined payments with added capability. For example, NAB in Australia now allows bill payments direct from Xero (see here).
  • Improved cash flow because it will be easier to get paid, make payments and get to access capital.
  • Improved information flow from banks into Xero through better quality bank feeds, as well as more banks around the world being added to the service.

In other words, better finance capabilities will mean better business (at least in the financial sense).

There are other examples of how open banking and the wider concept of ‘open finance’ could improve our experience and a few of the more interesting examples that we have come across are:

  • Retail payment smarts that could be used to split restaurant bills and pay automatically by mobile phone or smart device.
  • Applications that create dynamic personal budget advice and deliver the information in a timely fashion (e.g. when you enter a shop, or a personal financial advisor service).
  • Integration with the Internet of Things (IoT). It’s realistic to think that in the future your coffee machine will re-order its own beans.
  • Charitable giving will become easier. For example, Edinborough based Sustainably are using open banking to gather people’s digital spare change and put it towards a charity of the consumer’s choice.
  • Making it easier and faster to do business by streamlining compliance tasks such as anti- money laundering (AML) checks and verification.

Is it safe and secure?

Open banking is different from country to country and we hope to see a more standardised approach in the future. In the UK, the change is government regulated (set up and led by the Competition and Markets Authority on behalf of the UK Government). In New Zealand, the change is participant led and thus far self-regulated, with the major players driving innovation, decisions and change. Whilst those involved are working closely with the government, we do hope to see a more formalised approach that minimises risk and allows the necessary innovation the space to breath and evolve. The Ministry of Business, Innovation and Employment is seeking input on whether to develop a formal ‘consumer data right’ in New Zealand to give individuals and businesses greater choice and control over their data – see here.  We encourage you to read this discussion paper to have your say on the development of this regulation.

In terms of data security, the theory is that open banking allows greater security by removing the need to share passwords and log in details. The API technology that enables open banking are built by the banks themselves, so have bank grade security. Organisations within the financial sector are typically experienced and required to provide top level security. Nevertheless, we would recommend only engaging with reputable organisations that have a data sharing process that you are comfortable with.


Watch this space! The developments that are happening now and in the near future present opportunities for your business. Over the next couple of years we will see significantly improved efficiencies in the financial system that improve the customer experience and benefit business. Getting paid, making payments, and securing fairer access to capital should reduce your admin burden and improve cash-flow so it is worthwhile keeping up to date and exploring how open banking affects you.

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