At the beginning of 2020 there were a total of 5.94 million small businesses (companies with 49 or under employees) in the UK which amounts to 99.3% of the total number and a turnover of roughly £2.3 trillion. Many reports and articles have discussed the potential benefits of open banking to this significantly sized business community such as their being able to save money on transactions and the opportunity for them to radically streamline their accounting processes. However, potential benefits don’t always translate into uptake. Now, the Open Banking Implementation Entity (OBIE) has sought to find out how Covid-19 may have impacted these companies and spurred them on to transform the way they manage their finances.
Out of the two million UK-based customers using products powered by open banking, approximately 25% are small businesses, that’s around 700,000 companies. In the survey, the majority of respondents reported that they use products and services driven by open banking technology and 86% of these said this had been motivated by the pandemic. 24% are using cloud-based accounting services, 21% have implemented cash forecasting and 18% had applied for alternative lending products. One of the original goals of open banking was to make the financial sector more competitive. In 2016, the CMA Retail Banking Investigation reported that 4% of small companies in the UK had changed business current account in the previous year. This number was extremely low. With the advent of open banking, it has increased to 10% and this is even higher (at 17%) for companies that already use open banking-enabled products. 31% of respondents said they will consider switching accounts in the future.
When asked about the economy, 31% of those surveyed expect it to grow over the next few months, 29% think it will shrink and 35% predict stability. To some extent this shows how difficult it is to forecast the market right now which makes open banking tools and analytics even more helpful. Small businesses may be starting to see the benefits of using open banking to make and receive payments, manage their accounts and apply for loans but the opportunities and use cases are even more vast than that. The more money and time small businesses save, the more revenue they can generate and as a huge contributor to the UK economy, including the millions of people they employ, even small changes will make a big and positive difference.