Insight: It’s called Open Banking, but don’t underestimate its security

21 Apr 2020

Simon Cureton, chief executive officer, Funding Options looks into the current Covid-19 crisis, what it means for UK business and how Open Banking truly can be the saviour. 

Just a few short months ago and it would have been inconceivable that this mysterious coronavirus would impact the world so drastically. But here I am, working from my home office rather than at Funding Options’ London HQ. UK plc is experiencing an unprecedented time that will unquestionably go down in history. Companies, large and small, are navigating the choppiest of waters at present as a result of Covid-19.


As a nation, we’ve personally sought to safeguard our loved ones and take sensible measures to self-isolate and avoid spreading the coronavirus. As leaders, the responsibility is no less serious as we look to protect our businesses, customers and staff. Indeed, our employees are who make operating at this time possible.


But the fact of the matter is that, despite our best efforts to keep supporting independent businesses and meeting their needs during this challenging period, we’ve had our hands tied. In the current climate, British businesses don’t require funding for working capital next week, in a fortnight or next month, they need it yesterday to meet the evolving challenges being posed by Covid-19. Unfortunately, that’s not been the case with the existing Coronavirus Business Interruption Loan Scheme (CBILS), despite Rishi Sunak’s best efforts. In the first instance, alternative finance providers were side-lined and left spectating as traditional high street banks were allocated the power to dispense government funds.


The lending sector is facing a harsh drought due to extraordinary demand. We alone had more than 10,000 businesses request loans worth £1,015,843,585 throughout March. These are all applications that sat outside of the CBILS. It is time all firms are met with an exceptional response. Of course, nobody could have foreseen this coming but there is a tool at the disposal of the government, which isn’t being championed – Open Banking.


With Open Banking, you have a rich fintech solution that’s been available for a couple of years and yet many SMEs haven’t been made aware of its capabilities. But there’s usually a misconception that data security is lax, which is why adoption isn’t where the sector would have predicted. Although the term “Open Banking” may sound somewhat juxtaposed with the security-centric nature of finances, this isn’t the case. The notion that the use of Open Banking will make companies more likely to fall victim to breaches is nothing more than a myth.


The truth of the matter is that Open Banking can present SMEs with a greater selection of options for their finances. They won’t have to rely solely on conventional banks, which has traditionally been the case, they’ll have a wider array of service providers to access – all of which are regulated by the Financial Conduct Authority. As such, any sharing of data is entirely the choice of the business in question, and the exchange is done securely through APIs, preventing any leaks or foul play.


In the same way SMEs are being given more choice through Open Banking, they also receive greater flexibility. So just because they’ve chosen to share data, that doesn’t mean they’ll lose control of it for years to come – it’s simply a matter of contacting the service provider or their bank and rescinding the consent.


Aside from the ability to give third parties visibility of financial data, Open Banking is also powerful for internal company usage too. Indeed, SMEs will benefit from more transparent viewing of their finances using the technology, supporting everything from budgeting to cashflow and beyond.


As someone who has worked with legacy banks and now helming a fintech, I’ve long recognised the value of Open Banking. It’s a marketplace evolution that has been sorely needed to level the playing field for SMEs and alternative finance providers alike. We know that time is, quite literally, money – especially in these business conditions. Based on that, our own application of Open Banking at Funding Options has sped up the loan application process for SMEs, so that submissions will take a matter of minutes. This is opposed to the more commonplace days or hours they’re typically required to wait.


These are unique times, so it’s time for SMEs to take a unique approach. The journey to make Open Banking the norm won’t happen overnight. And as an industry, we have to work harder to get the word of the technology and its benefits out there to SMEs – not just now, but when this period has passed. The potential of Open Banking is huge, so it’s essential that everyone knows it.