Getting your head around Open Banking and putting yourself in a position to explain it to your client base is a savvy move in 2020.
Open Banking, which opens the way for new financial apps and websites, will bring about new methods of interacting with services for small and medium business clients. It may also change the services and advice you offer.
Open Banking will introduce a slew of new financial products and services, as well as a new level of access and control over accounts, transactions and financial information.
“It’s going to take a while for us to see really new, very different services,” said Imran Gulamhuseinwala, the head of Open Banking Limited.
But as he says, once it has some legs, “it’s going to be revolutionary”.
Are you across the details and benefits Open Banking may bring to you and your UK clients?
What is Open Banking?
Open Banking is a government led initiative managed by the Competition and Markets Authority (CMA), which kicked off in 2017. The basic premise is that a range of data that banks hold will be able to be accessed and shared by your clients for a variety of benefits.
Open Banking isn’t an app or a service in itself, it’s merely a new way of sharing financial data with third parties to develop better apps and services for your clients.
Open Banking necessitates that the UK’s nine biggest banks – HSBC, Barclays, RBS, Santander, Bank of Ireland, Allied Irish Bank, Danske, Lloyds and Nationwide – will essentially share their data to authorised third parties in a secure and standard format.
This data can be used to create new financial products and also facilitate direct financial product comparisons, all to the benefit of your clients if they should take them up. They’ll also be able to have much more control and access to their own financial data, often cutting out ‘middlemen’ in transactions.
It will be interesting to see how this initiative will transform and evolve over time as the implications are only just being realised.
Why is Open Banking being rolled out?
There’s a lot of murky water in the banking system. A lack of transparency and control over this data is being addressed by Open Banking.
Most people in the UK stay with the bank they chose as teenagers and seldom shop around. This can be addressed with Open Banking by laying out choices to the consumer. There’ll also be a new openness and access to data that was previously tightly held by banking institutions.
In another manner, innovation in the financial sector will be boosted by access to such data in certain permitted circumstances. Business opportunities will abound.
How might your clients benefit from Open Banking?
This is an interesting and evolving question.
There’ll be an immense benefit in your clients being able to view all their finances in one place, thanks to Open Banking.
Open Banking may be the key to helping a client’s budget, find better deals, and shop for the best matching products and services. Your clients will be able to choose to give a regulated and trusted source extremely secure access to their current account information. As an advisor, this trusted source could be you.
As an example, your client may want to compare account deals among various banks or share selected transaction or balance details for the sake of a loan or to receive better financial advice.
It also opens up direct transfers and purchases with no middle vendors.
It should be noted that this data sharing can only be done with your client’s permission.
As Gulamhuseinwala says, “we’re giving consumers control over their data”.
How might you benefit as an accountant?
As an accountant or trusted financial advisor, you may be granted new opportunities in terms of client services and advice. Advisors, accountants and bookkeepers rank highly in terms of consumer trust, so opportunities certainly exist.
By becoming a trusted recipient of information, you’ll have access to individuals and pools of their financials.
This will be extremely interesting in terms of the advice and subsequent recommendations and services you can offer.
If you can imagine having trusted, independent access to multiple bank accounts and transaction histories for a business, in real time, you’ll see that the kind of advice you offer will be improved.
Accountants will be able to use this rich data to form a much deeper understanding of a client’s business to provide a more customised advisory service. Client cost savings, for example, will become readily apparent and recommending a new and beneficial type of account, loan or business approach will become easier.
Furthermore, as new financial products roll out due to Open Banking, you’ll be in a unique position to recommend these to your clients as part of your service.
On another note, Open Banking can also make the act of bookkeeping a simpler and more efficient affair.
In a time when businesses are under unique pressure due to the events of 2020, accurate and trustworthy advice, driven by data, will be well received as business owners seek out any advantage they can get.
The role of the advisor is set to evolve under the rollout of Open Banking. Watch closely.