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In the modern world Banks have a perplexing problem; consumers want more convenience (easy ways to check their balance and make payments) at the same time as greater safety and security (of their data and finance, especially post General Data Protection Regulation (‘GDPR’)). A few changes have taken place recently as steps towards this, known as Open Banking.
Open Banking rules are designed so banks must share your financial information with other authorised providers. For those of you that for example use Bank Feeds into Xero or QuickBooks, this isn’t new, but the legislation paves the way for an acceleration of the sharing of your financial data, safely and securely, across more platforms. Yes, it is delayed, and yes, it is less extensive than hoped, but we’re still excited about it.
Payment Service Directive (‘PSD2’) and Target Instant Payments Settlement (‘TIPS’)
At the start of 2018 the PSD2, took effect across the EU seeking to both encourage collaborative efforts between banks, FinTech’s, and third parties to have greater access to financial information via application programming interface (‘APIs’). Their aim was clear; maintain Europe’s competitiveness in the face of technological competition globally. Linked to it is the TIPS, which aims to be become a widely used pan-European fast bank-to-bank payment network.
The first key deadline of 14 March 2019 came and went with just 59% of the 442 European banks completing their work in time (UK only: 67%). The next deadline is 14 September 2019, when banks are expected to have implemented dedicated APIs for third parties; it’s safe to say there won’t be 100% compliance here. That said, their challenges aren’t insignificant; this isn’t an easy space and Facebook quickly pulled the plug on its Messenger person-to-person (P2P) payments service.
Open Banking should open the way to new products and services that could help customers and Small and Medium Sized Entities (‘SMEs’) to get a better deal. It could also give you a more detailed understanding of your accounts, and help you find new ways to make the most of your money. Where the providers are regulated by the Financial Conduct Authority (‘FCA’), the world of Apps and Websites can accelerate this further.
Don’t worry however, you are still in control; you decide who has access to what and for how long.
What do these Open Banking changes mean for me?
Bookkeeping software can enable you to email quotes and invoices directly to your customers. You can then use bank feeds to take the legwork out of bookkeeping, with expenses captured and payment of invoices noted. All of this can be done anywhere in the world where you have an internet connection.
Where you use bookkeeping software, such as Xero or QuickBooks this should be a big step forward, as more banks will be able to provide your financial information to these platforms, directly and freely. You will no longer have to do CSV uploads or use third parties who use screen-scraping technology, like Yodlee, so the data is more up to date, more quickly and more secure. However, before you turn off the old one, we would recommend that you test the new feed so there aren’t any gaps in data. In the short-term, where your bank is not compliant, there may be a few hiccups with disruption to your current feed and you may have to for example do manual CSV uploads into these platforms.
Does Open Banking mean an Evolution or Revolution?
There are some key new entrants into the banking marketplace, with Monzo, Tide and Starling just three who are entering Business Banking. Compared with the Traditional Banks, they are much better placed to not only meet the new legislation quickly, as they are much more agile and have more lean architecture that can be designed from the bottom-up, but they can also benefit significantly as their data can be shared across many platforms, reducing the impact of close relationships, such as NatWest has with FreeAgent. With these new incumbents changing the face of banking, will they be the catalysts for much needed change, and will they introduce competition in the marketplace with more customer choice? Or will they simply serve a purpose then be acquired by the Traditional Banks or die a death? Only time will tell. They may however at least contribute to bringing the Open Banking dream more to life, by putting more pressure on the Traditional Banks.
Open Banking’s Impact on Price Comparison Sites
Price Comparison websites transformed the Insurance Sector and there is still hope the Open Banking regulations will have a similar impact on the banking world. It’s not there yet, but with consumer pressure, there is still hope and the revolution is certainly underway.
Get ready for Open Banking
If you are unclear how the Open Banking Regulations will impact you, or you are having issues with your bookkeeping software as a result of the change and don’t know what to you, contact Black and White Chartered Certified Accountants today, or call us on 0800 140 4644.
