Research by Open Banking has revealed that at least 750,000 SMEs now integrate their bank accounts with third-party services to reduce the cost of transactions and help to manage cash flow.
The research also revealed that the number of open banking payments has more than doubled last year to 68 million with small firms adopting the technology more quickly than consumers.
The data shows that open banking-enabled products are being used by over seven million consumers and small businesses. Despite more products being available to consumers, adoption by businesses is higher than consumers with a 16% penetration rate versus 11%. The latest data shows the gap between the two is widening and is largely down to more small businesses using cloud accounting software that uses open banking to import transaction data. There is a clear difference in consumer and SME use of open banking too. Small business use is dominated by data-driven account information services (AIS) which allow firms to see multiple accounts in one place, providing valuable real-time insights for cash flow and forecasting. This accounts for 79% of business use.
In contrast, this falls to 52% among consumers, who may use these services for money management tools, for example, to help them budget. However, consumers are using more payment initiation services (PIS), which allow them to move money, for example, to top up wallets, or to pay tax or credit card bills.
Other key insights include:
The research also found an increase in services offered by agents of regulated third-party providers (TPPs). There were 173 such firms with live-to-market services at the end of 2022, an increase of 33 since the end of March 2022. The organisations innovating in this space are typically small start-ups, working with larger TPPs. This provides a quicker and more cost-effective route to market, while supporting greater innovation.
Marion King, Chair and Trustee, OBL, said “It is encouraging to see a continued and steady increase in the adoption of open banking products and services, particularly by the UK’s small firms which are seeing tangible benefits from real-time business insights offered by open banking data.”
“It is also exciting to see the expansion of services in key areas such as borrowing and financial decision-making, empowering people to make better informed choices about managing their money, which is crucial as we face an increased cost of living.”