The Financial Frontier: Where Open Banking Intersects with Innovation

Dermot Hamlin, UK Ambassador for UNIPaaS, Steve Cox, Head of Market Insights at IRIS, and Lucy Cohen, Co-founder of Mazuma Accountants, discuss open banking and how it has disrupted the world of finance

The Freedom of Open Banking

The conversations around open banking have grown louder over the past few years as the technologies, innovations, and implications of this capability have reached mainstream media, the boardroom, and shaken, the core of financial institutions. The technology has been around since 2018, but now it has gained traction thanks to the disruptive freedom it offers organisations. Within the world of open banking, non-financial institutions can provide banking functionalities and services through APIs that allow them to expand their offerings and transform their customer ecosystems.

The possibilities that open banking introduces are significant, particularly when it comes to transforming financial access and management for small to medium enterprises (SMEs), and this is key to economic growth in the United Kingdom. According to Gov.UK, SMEs account for three-fifths of employment (61%) and half the turnover (£2.1 trillion) of the private sector. They therefore require financial support better customised for their unique needs and expectations.

Who is Using Open Banking?

The users of open banking fall into two distinct camps – pro-technology and no-technology. Pro-technology may be digitally naïve, but they’re comfortable with digital, using apps and banking solutions that allow them to connect to the potential of open banking. They’re comfortable in the digital realm and understand the risks and the capabilities. Those who are no-technology tend to be left behind as they’re uncertain of the technology and how it ensures their financial growth and security. It feels overwhelming and complex.

This misconception is largely due to the fact that open banking wasn’t introduced on the layman’s level and so many companies were concerned that using the technology would open them up to fraud and risk. They think an open bank account is one that anyone can use – the misnomer making it hard for companies to understand the value when, in fact, the term refers to the ability to manage transactional and financial data seamlessly.

The challenge now is to bring the no-technology SMEs into the open banking ecosystem so they can benefit from the immense value it brings to them on a financial and administrative level. As many SMEs are micro-businesses or sole proprietors, they can fall behind their competitors if they aren’t able to offer relevant and modern payment solutions to their customers. Now that the technology has evolved to become user-friendly, accessible and intensely customisable, it’s important that no SME is left behind.

Is Being Left Behind Such a Problem?

Sure, SMEs can continue to manage their payments, transactions, paperwork, customers, reconciliations and cash flows using traditional tools and financial institutions. But they lose out in terms of two of the most important and constrained commodities in the SME space – time and money. Open banking solutions are designed to streamline, automate, modernise and improve these administrative burdens, freeing up time and reducing errors. Using the right tools, SMEs can match transactions at speed, manage payment schedules more effectively, implement automated processes, and manage data and accounting more efficiently. They become more productive because technology is shouldering most of the weight.

IRIS Pay, an open banking platform powered by UNIPaaS, is one solution that has tapped into this emerging market, and the needs of the SME. The platform is designed to simplify any SMEs life by moving manual paper processes into a digital environment that puts data, payments and insights only a click away. SMEs using this platform no longer need a bank book or separate receipts, everything runs through the system that also adds in all the functionalities of a bank.

Open Banking Makes Life Easier, and This is Exactly What the SME Needs

The SME is under pressure. Economy, cashflow, poor payments, cost-of-living, geopolitical instability – the list is long, and the complications exhausting. There is no way of getting around much of the complexity that affects the SME right now, but the right financial structures go a long way towards mitigating much of the risk. Shifting to an open banking platform capable of handling the layers of admin that reduce productivity and increase costs is a smart way of changing how SMEs engage with their finances.

As the world shifts into second gear, moving into the second quarter of an increasingly challenging year, it’s no surprise that SMEs want an easier life, and no surprise that open banking solutions are evolving to meet this need. The technology is gaining mainstream traction and acceptance, and the companies that leverage its functionality are becoming increasingly inventive in their approaches and embedded finance capabilities. And, at the intersection of innovation and open banking, there is a wealth of potential for the SME and platform alike.