Open banking legislation will open up competition and spark innovation, ultimately changing the way SMEs bank.
In the world of banking for an SME or freelance until now, the best you could hope for was to open a business bank account, get an SME loan and cross your fingers.
Financial literacy was a long shot and the financial, and overall success of your company was little more than a case of the luck of the draw.
Nowadays, small business accounting is simple and Open Banking has a lot to do with reducing the headaches freelancers and business owners suffer time and time again. Samuel O’Connor, CEO of Coconut - an account provider built around the unique needs of freelancers and self-employed people - mentioned in interview with us that, “SMEs have traditionally been lumped into one category together. But the needs and desires of a freelance designer compared with those of a 200-employee company are completely different”.
Now, in an era of free access to data, this can only be a thing of the past, surely? After all, banks and financial institutions have more information about the needs and wants of their SME customers than ever before.
This, of course isn’t the first time we are debating the issue of SMEs and their particular banking needs, and indeed how banks can harness the huge opportunities that this segment offers, but a few months into Open Banking and a week or so from GDPR, what is the lay of the land for the smaller business? Are there improvements in sight? Have there been any yet?
Fintechs and SME-focused startups were poised, ready to partake in this effective data open house, way before the kick-off date of 13th January 2018, offering the helping hand that these small businesses and entrepreneurs so desperately needed.
First to the table, the UK, followed closely by the rest of Europe, with companies such as Growth Street, ThinCats, and numerous others offering business loans and assistance, allowing clients pay back only what they use, and avail of credit when they need it most.
Banks and lenders are now more able to assess the creditworthiness of companies thanks to advances in open banking legislation, but by the same token, it is far easier for small businesses to rate market offerings, connect to Fintech services and access a range of solutions - and infinitely better quality solutions at that - than ever before.
Open Banking means open access to data for banks and lenders, but also a far clearer view of the options on offer to the end-user, or business owner.
What works for one company, may not work for all, just in the same way as blanket banking services for the average Tom, Dick or Harry on the high street. The more personalized the offering, the better for bank and for business customer.
With an SME, the debate or internal conflict that comes with sharing personal financial data is far less prominent; an SME or freelance is far more likely to hand over information relating to their company in exchange for a service that is going to help them out of a tight spot. Data access for an added-value service or access to capital.