Open banking has been a topic of lively discussion for a while now – and the talk is starting to translate into action.
By allowing challenger banks, fintechs, third-party providers and consumer groups to access data from bank customers, open banking means third parties can access data from customers just like you – with your authorisation – in order to help you get and keep control of your finances.
At Xero, we are all too aware of these benefits: our full-featured API (Application plug-in) for bank feeds makes it really easy for small businesses and advisers to get the financial information they need, when they need it. With the surge in APIs like this, there is huge potential in this area for small businesses in South Africa. Here is why.
Access to funding is a key operational challenge for South Africa’s small businesses.
Open banking APIs can improve the application process. By sharing your financial data instantly, lenders immediately know your company’s revenue, its profits, and its cash flow – allowing them to make informed decisions in a short space of time.
Access to funding will remain a challenge, but several of the more frustrating things about it will be mitigated or eliminated. There should be less time spent in long queues only to receive an inexplicable no – and fewer long journeys to the nearest branch: you can apply for the services you need and get an answer (and your funds) sooner than expected. Unsurprisingly, it’s a model that South Africans have been very positive about.
And it goes beyond lending. With real-time data, bank feeds can facilitate easier cash flow management, easier tax deadline management, and sophisticated performance analysis – with little to do on the part of the business or the accountant.
Institutions from all over the world will be able to connect to platforms instantly and seamlessly: providing data from hundreds of sources in a single, convenient place. It saves time, it saves money, and it gives you the space to pursue the things that matter to you – rather than worry about finances.
Open banking is, for now, an exciting potential development rather than a reality – but expect that to change soon. Its promise is to improve the banking system for institutions, consumers, and small businesses; with time, and with popular adoption, it may well do just that.
Article written by Donna Torres, Director of Small Business, Xero