We’re talking about the Second Payment Services Directive (PSD2) and the possibilities it opens up for new and important players, who are more flexible, more digital and more connected in our modern fluid society, to establish links and capitalise on the relationships between businesses, clients and traditional financial entities.
If we talk about PSD2, then we have to talk about the opportunities provided by Open Banking, a combination of interfaces providing consumers and business owners the option to share financial information with other banks, financial service providers and trusted third parties. The importance of Open Banking is that, as long as it’s done effectively, using these options can help any company achieve certain key objectives, be it better cash flow management, a better range of products and financial services or the reduction of recurring costs.
And if that doesn’t already sound like an enticing market to get hold of, recent data from the Federation of Small Businesses (FSB) in the UK points to the fact that many small businesses are slow not just to take advantage of these opportunities but to understand them or even know much about them. Following a survey, the FSB has published a number of figures which highlight the current minimal impact of the legislation in certain business segments.
According to the FSB survey, which collected data from more than a thousand of its members, slightly less than one sixth (15%) of small businesses are, in fact, currently sharing their business bank account data electronically with third parties. Of those that do so, a huge majority (87%) only do so to update their accountancy software.
And it’s not just that only a minority are using these capabilities. It’s also that case that nearly two thirds (65%) of small businesses claim that under no circumstances would they consider sharing their banking data with other financial service providers electronically. In other words, there’s a long road ahead to convince small business owners – a complete win-win, both for companies that want to guide them towards PSD2 and for the small businesses themselves that use this new scenario to increase their revenue, profitability and efficiency ratios.
If we look deeper at this business segment that doesn’t show any real feeling towards the directive, the FSB has found that over four in ten (43%) believe that sharing banking data in this way compromises data security, whilst a slightly smaller but significant proportion (37%) have significant doubts about the supposed benefits of starting such activity. Furthermore, of those small business owners who wouldn’t consider sharing their business banking data with other financial service providers electronically, 17 of every 20 (85%) claim that, when they have to, they’re ‘wary’ about doing so.
“We’ve always said that – done right – the benefits of Open Banking will be huge”, says Mike Cherry, national chairman of the FSB, according to a press release. “Giving small businesses the ability to integrate cashflow, invoice, payroll, utilities and tax data in one place means giving them the ability to identify new efficiencies. And by sharing that big picture with trusted experts, gains should be amplified.”
The chairman of the federation doesn’t hesitate to point out some possible causes of this indecision: “The financial crash casts a long shadow. A lot of small business owners still don’t trust lenders to do the right thing. (…) This was always going to be a hard sell – one moment we business owners are told to do all we can to protect sensitive data, the next we’re being told it’s safe to dish it out.”
Although the survey focuses on the business reality in the United Kingdom, its conclusions are valid for the majority of markets. Of these conclusions, it claims that there is a need to see concerted efforts at an institutional level to “ensure that Open Banking application programming interfaces are absolutely watertight and small business owners are fully aware of the benefits of using them.”
If this can be done, GDS Modellica agrees with Cherry when he says, “There’s still time yet for a small business banking revolution.”
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