What is open banking and why is it safe for small businesses?

Open banking is a UK regulated system that lets your business share its bank account data securely with authorised apps, lenders and accounting tools, instead of emailing PDF statements or manually retyping transactions. You stay in control throughout, nothing moves without your consent, and only the data you approve is shared, on a read only basis, with providers who are checked and regulated by the Financial Conduct Authority.

This guide covers how the technology actually works, whether it is safe to connect your business account, exactly what data gets shared, the everyday ways small businesses use it, and what is changing in UK open banking regulation this year.

What is open banking?

The term "open banking" originated as part of a major UK regulatory push to increase competition and innovation in financial services. In 2018, the UK became one of the first countries to implement Open Banking standards, requiring banks to securely share financial data with customer consent. Since then, the concept has evolved, offering small businesses and consumers a powerful and secure way to access tailored financial services, manage cash flow, and improve efficiency.

How does open banking work?

Open Banking operates using Application Programming Interfaces, known as APIs. These act as secure bridges that allow different financial software systems to communicate and share data with each other efficiently. In practice, connecting an account looks like this:

1. The user, you, consents to the data-exchange through a secure API, you can withdraw this permission at any time.

2. APIs link your bank with trusted third-party services, like accounting software or payment systems, allowing them to interact directly.

3. As a business owner, you control what financial data you share and who you share it with. You give explicit permission for these services to access specific parts of your financial information,

4. Open Banking uses strong security measures, including tough encryption, to ensure your financial data is always protected.

Every provider offering this service has to be authorised as either an account information service provider or a payment initiation service provider, and listed on the Financial Conduct Authority's register and the Open Banking Directory before it can request access to a single UK bank account.

Is Open Banking safe?

Open banking is built on the same regulatory foundations as your everyday online banking, so connecting your business account carries a similar level of oversight and security. It is supervised jointly by the Financial Conduct Authority and the Payment Systems Regulator, with every provider legally required to meet UK banking grade security standards before it can operate. A few safeguards worth knowing about specifically:

• Every provider must be authorised and listed on the Financial Conduct Authority's Financial Services Register, which you can check yourself before connecting an account.

• Connections are encrypted and protected by strong customer authentication, the same standard used for card payments and online banking log ins.

• Access is read only unless you have separately approved a payment, so a provider can view your data but cannot move money out of your account without your explicit authorisation each time.

• Your bank login details are never shared with the third party provider, only your bank sees your password.

• You can revoke access at any point, either through the provider's own settings or directly with your bank.

Providers were previously required to ask you to reconfirm access with your bank every 90 days. However, the FCA removed this requirement in March 2022, so consent is now managed directly with the provider rather than through a repeated bank login. Its worth reviewing which apps have access to your accounts on a regular basis and removing any you no longer use.

What data can an open banking connection share?

An open banking connection can share the following categories of account information, depending on what you approve:

• Account details, including the account holder name, sort code and account number.

• Account type, currency and the date the account was opened.

• Current and available balance.

• Transaction history, including dates, amounts and payee or payer descriptions.

It cannot share your login credentials, and on its own it cannot move money out of your account. A separate type of provider, a payment initiation service provider, is needed if you want to authorise a payment directly from your bank account rather than by card, and each payment still requires your explicit approval at the time.

What can small businesses actually use open banking for?

Open banking has moved well beyond a niche fintech feature. According to Open Banking Limited, UK adoption passed 15 million users by July 2025, nearly one in three UK adults, with usage up 34% year on year, so a growing share of your customers, suppliers and lenders are already using it too. For a small business, the practical uses fall into a few areas:

• Faster loan decisions. Lenders can review up to date, verified account data in minutes instead of downloading, exporting and uploading months of PDF bank statements. That can shorten the time between applying and getting funded.

• Simplified payment management across accounts. If your business banks with more than one provider, open banking can bring the data from all of those accounts into one dashboard, so you are not logging into several banking apps to get a full picture.

• Secure payments. Rather than setting up a payment manually or relying on card details, a payment initiation service provider can send a payment or a direct debit style collection straight from your bank account, verified in real time.

• Accounting software that reconciles itself. Linking your business account to Xero, QuickBooks or Sage means transactions feed through and match automatically, cutting down on manual admin and reducing invoice reconciliation errors.

• Cash flow forecasting. Tools built on open banking data can pull in real transaction history to build a live picture of what is coming in and going out, rather than relying on a static spreadsheet.

• Expense management. Connected account data lets expense tools categorise and track spending automatically, instead of a business owner or bookkeeper sorting through statements by hand.

• Identity and income verification. Lenders and other providers can confirm who you are and verify your business's income directly from your account data, rather than asking for certified documents.

Payments themselves are moving on too. Commercial variable recurring payments, a way to authorise ongoing payments such as supplier invoices or subscriptions directly from your bank account, went live for the first time in November 2025, and the Payment Systems Regulator reports they are being positioned as a cheaper alternative to card payments and direct debit for recurring business costs.

What is changing with open banking regulation in 2026?

Open banking in the UK is in the middle of two changes that are worth knowing about if your business relies on it, or is thinking about starting to.

• Data (Use and Access) Act 2025. This received royal assent in 2025 and extends the open banking model into a wider smart data framework, giving government the power to open up the same kind of secure data sharing across areas like savings, pensions and insurance, not just current accounts. The SME Finance Taskforce has linked this wider data sharing to closing the UK's SME funding gap, estimated by the Bank of England at more than £22 billion, and the FCA has committed to publishing its wider open finance roadmap and a long term regulatory framework for open banking during 2026.

• Future Entity replacing Open Banking Limited. Open Banking Limited, the body that currently runs open banking's day to day standards, is being replaced by a new, industry funded body known as the Future Entity, overseen jointly by the FCA and the Payment Systems Regulator. This does not change how safe or regulated your own connections are, it is a change to who runs the standards behind the scenes, and the transition is expected to complete during 2026.

Does Capitalise use Open Banking?

At Capitalise, we partner with 130+ UK business lenders, some of these lenders may require an Open Banking connection as part of their loan application process. This often simplifies the experience for you, as you won’t need to manually upload individual bank statements to apply for a loan, making the process faster and more efficient.

Thanks to our business credit score platform, when you log into your Capitalise for Business account, you can see if you’ve been pre-selected for a business loan. If eligible, you can access our pre-approved loans flow, which quickly provides insight into your likelihood of qualifying for a loan, how much you could borrow, and the rates available to you. This helps you make informed decisions and proceed with a loan that fits your business needs seamlessly. Throughout this process, we enable customers to connect to Open Banking to access instant, pre-approved loan offers.

Importantly, Capitalise is regulated by the Financial Conduct Authority (FCA), ensuring that all Open Banking practices and partnerships are secure and compliant.

Connect your bank data for faster access to finance

When you apply for business finance through Capitalise, you can connect your bank data as part of the application to our panel of 130+ UK lenders. That gives lenders a clear, verified view of your finances from the outset, which can mean a faster decision than sending statements separately. Apply for business finance and see which lenders and rates you match with, based on your business's real financial data.

Watch our video on open banking safety

For a quick summary of the safeguards covered in this guide, watch our short video with Capitalise CEO Paul Surtees explaining why open banking is safe for your business.