By Colin Timmis, General Country Manager, Xero SA, and professional accountant.
Open banking has been the talk of the financial services industry for a while now. And as 2019 picks up speed, the talk is turning into action. Open banking, essentially the use of APIs and open-source technology, is already transforming how financial service providers and consumers manage, share, access and use data. It works by giving third-party developers access to financial data to build supporting applications and services.
The whole premise of open banking is to make money management easier, more transparent and collaborative for businesses and individuals. It allows selected challenger banks, fintech solutions, third-party providers and consumer groups to access data from bank customers like you. Of course, your authorisation is crucial – the overall objective is to help you get and keep control of your finances.
So, what does that mean for South Africa’s small businesses? Well, the potential benefits of open banking are huge. Here’s why.
Small business growth in South Africa is hampered by vast distances between non-urban and urban areas. Many small business owners simply don’t live and operate in easy distance from a bank branch. And even if making the journey is physically possible, it’s often a lengthy and costly process. What’s more, it’s unlikely that all issues are resolved in one consultation, putting small business owners under increased pressure to hang around until they get the decision or information they need.
Full-featured APIs for bank feeds support the surge in branchless banking, making it really easy for small business owners – regardless of where they are based – to get the financial information they need, when they need it. Access to financial services is no longer limited to ‘bricks and mortar’ outfits in the areas with the highest concentration of demand, and you no longer need to stand in long queues to get the service you need.
Open banking, open access
Open banking APIs mean small businesses can apply for the funding they need and get an answer almost immediately. By sharing your financial data instantly, potential investors have immediate access to your company’s revenue, profits and cashflow – enabling them to make a fast, informed decision.
The benefits don’t stop there: with real-time data, open banking can help you manage your cash flow more efficiently, approach tax deadlines without stress and perform sophisticated systems analyses without disrupting your business – or waiting for the accountant to get back to you with the information you need.
Open banking offers South Africa’s small businesses greater access to the world. Institutions across the planet can connect to selected platforms in an instant, accessing data easily and seamlessly. It’s a much more convenient and efficient way to manage finances; saving small businesses time and money – and giving owners the space to focus on their customers and growth targets.
While open banking is still considered to be in its infancy, it’s growing fast. No longer confined to the shelf of ‘exciting potential development’, open banking is now a reality. South Africa’s small businesses can use open banking to embrace a world of new opportunities, and benefit from an improved banking system here – and globally.