The concept of Open Banking has been explored since the early 2000s, since then, technology has advanced and it has become more widely used.
Today, Open Banking offers both consumers and small businesses a secure and efficient way to share financial data. 10 million businesses and consumers in the UK already use Open Banking.
In this article, we'll explain how Open Banking works, address safety concerns, explain how it can be used and how it can be beneficial for your business.
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.
In itself, Open Banking is a technology system that enables small businesses to securely share their financial data with authorised third-party providers. With Open Banking, small businesses can streamline their transactions, initiate payments, and access tailored financial solutions, making it easier to manage finances without relying solely on traditional banking methods.
Advantages and applications of Open Banking for small businesses
"Open Banking is central to our mission to help make business finance more open and transparent. Now is the time to open up to all our business owners to get faster and more accurate quotes for finance on Capitalise." - Ollie Maitland, Capitalise Co-Founder.
Open Banking provides small businesses with significant advantages, helping them access faster financing, manage their finances more efficiently, and leverage real-time data in a time-efficient, simple and secure way.
Here’s an exhaustive look at the benefits and practical applications:
Companies like Xero, Monzo, Revolut, Vodafone, Truelayer or MoneyHub rely on Open Banking to deliver fast, secure services to their customers.
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.
Here's a breakdown of how Open Banking works:
This technology gives you access to powerful financial tools and services, helping streamline your operations and make managing finances more straightforward.
Is Open Banking safe?
Open Banking is designed with security as a top priority. In the UK, the Financial Conduct Authority (FCA) oversees and regulates Open Banking, ensuring that only authorised entities can access sensitive financial data.
Here’s how security is maintained:
If you want to know more about Open Banking safety, you can consult this article: https://www.openbanking.org.uk/why-open-banking-is-safe/
What information can be accessed through Open Banking?
Open Banking is designed to prioritise user security and data transparency. Importantly, it does not involve sharing any passwords or login details. Users allow the sharing of specific, read-only data related to their bank accounts.
The accessible information typically includes:
Users have full control over what data to share, for how long, and with whom, helping them feel confident in managing their financial information securely.
Does Capitalise use Open Banking?
At Capitalise, we partner with 100+ 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.
In addition, 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.