“Open banking is a game-changer, a revolution, the most significant change to banking in our lifetime, the Spotify or Netflix of the financial world”
A report by the CMA showed that the UK’s major banks weren’t having to compete hard enough while challenger banks, fintechs and other third-party providers struggled to enter the market. Open Banking is designed to change all that.
It was designed to encourage competition in the banking industry, giving consumers more choice, as well as greater control of their data and how it’s used but how will open banking affect individuals and businesses across the UK?
The fundamental change of Open Banking surrounds control. Open Banking puts the consumer in control of their data as opposed to the bank.
Having control of their data means consumers can choose to share their data with authorised third parties. This opens a whole world of opportunity for personalised services and is enabling innovative banking products to enter the market.
Why does this matter?
Giving the consumer greater control of their financial data enables them to gain a greater understanding of their money, in turn enabling opportunities to save money and then make informed decisions when and where to invest that money that they have saved. Perhaps an overly optimistic expectation for some, however having vision of financial data will also highlight any potential requirement to secure funding. The ease in which this funding can be accessed is then also aided by open banking.
Open banking will also offer increased security, enabling banks to monitor accounts in real-time and detect signs of malware infection, data capture or manipulation by unauthorised parties. These additional layers of security will allow financial institutions to react immediately to deter potential fraud, instead of trying to recover funds retrospectively.
How does this affect Cloud Accounting?
If you are currently using the bank feed feature within your Cloud Accounting solution the introduction of Open Banking may affect the way in which your bank feeds operate.
Your bank feeds and Open Banking
From 14th September new bank feeds will be required to meet Open Banking regulations. These new bank feeds are available for most UK banks and account types however, some banks are not yet available. This change will affect all existing Quickbooks connections and many of Xero’s bank feeds will be replaced by new direct feeds. In both instances, Quickbooks and Xero will notify you when a new Open Banking feed is available. See our blog fore more details here.
If you are a Xero user connected to a Barclays bank feed, or a UK or EU feed set up using Yodlee, these will no longer be available under the new requirements. You’ll need to change to a new direct bank feed, where one is available so that transactions can continue to flow into Xero each day. These new bank feeds will be free and the set up will be paperless.
In all instances, the account holder will be required to log into their online banking account and authenticate the new Open Banking feeds, this consent will last for 90 days, after which the feed will need to be re-authorised.
If you have any questions on how these changes affect you, please get in touch with your local UHY cloud representative.
About the author: Rebecca Roberts
Becki is an assistant manger at our Nottingham office, with over 8 years’ experience, and a specialism in cloud accounting. She works with a wide range of owner-managed businesses providing compliance services and helping them to achieve their business goals.