Open Banking legislation has done little to increase competition or reduce costs in the payments market, a major report has revealed.
Commenting on the second anniversary of the roll-out of the Second Payment Services Directive (PSD2) in the UK, the Federation of Small Businesses (FSB) said few business owners trust banks with their data.
Under the Open Banking scheme, businesses have the option to share financial data with approved banks, finance providers and third parties. The Government said this would result in better cashflow management, improved deals on financial products and services, and a reduction in recurring costs.
However, a new study carried out by the FSB reveals a “lack of appetite” for financial data sharing.
According to the report, just one in seven (15 per cent) small firms are actively sharing their business bank account data electronically. Of these, a large majority (87 per cent) do so via online accountancy software.
Around 65 per cent of small business owners, meanwhile, said they would “not consider” sharing banking data with financial services electronically.
Of these, four in 10 (43 per cent) report distrust in the system while 37 per cent are “unsure about the benefits”.
Commenting on the report, FSB National Chairman Mike Cherry said: “We’re two years on from the introduction of Open Banking but very few small firms have reaped any benefit from it.
“We’ve always said that – done right – the benefits of Open Banking will be huge. 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.”
He added: “However, the financial crash casts a long shadow. A lot of small business owners still don’t trust lenders to do the right thing.”
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