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Open banking four years on: What’s changed for accountants?


Use cases for open banking are multiplying and while it may not yet be appropriate for every firm, there are overarching benefits that are worth accountants keeping an eye on.

16th Mar 2022
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This year, open banking celebrates its fourth birthday. The legislation was devised to give consumers and businesses more control over how they share their financial data with third parties and to benefit from a more competitive market.

There are now over five million regular open banking users in the UK, and the open banking app store lists more than 100 third parties that make it easier for users to have control over their money.

Accountants are important stakeholders for open banking. Their use of financial data combined with their client base can help raise awareness in the marketplace, as well ensuring that the products that make use of the technology are actually useful. 

Open banking has enabled a powerful new paradigm of data collection and processing and can help propel accounting firms into a more efficient future. It’s therefore worthwhile for accountants to spend some time exploring potential use cases for the technology to identify whether solutions can meet the specific needs of the firm and clients. 

Even if the use cases are not yet appropriate to adopt for firms, there are overarching benefits to open banking that are worth keeping an eye on. As the accounting market evolves, it is possible that over time accountants will need to rely on it to stay competitive. 

Below, I have highlighted some use cases and benefits - there will be more to add to the list as time goes on.


Use cases

For the interested accountant, regulated apps are listed on the open banking App Store. The main use cases that have developed so far are access to secure bank feed data, financing options, payments tools, budgeting, price comparison and credit scoring, for example with:

  • Cloud accounting software - many accountants will be familiar with open banking from the bank feeds through cloud accounting software such as Xero or QuickBooks. As discussed in my last piece, planned changes to authentication are likely to bolster the effectiveness of these feeds.
  • Financing companies are using open banking data to further automate their processes and shorten the time it takes for businesses to access finance. Applying for finance seamlessly will become more important later when the covid government support schemes end, alongside further pressure being put on payroll due to the NIC increase.
  • Payment Initiation Service Providers (PISPs) are disrupting payments by allowing businesses to initiate payments directly from their platforms. 

John Toon, Digital Strategy Lead at Beever and Struthers, believe products that utilise this technology have enormous potential.

“Many SMEs still prefer to pay by bank transfer rather than by direct debit and card,” said Toon. “However, in time open banking payments will become more mainstream. Unlike many existing payments tools on the market, providers like Comma don’t use third-party wallets to make disbursements, with payments made directly from bank accounts. This streamlines the payments process, with accountants being able to send approvals to their clients from within their accounting software.”

Benefits for accountants 

One of the main benefits of open banking for accountants is the streamlining of accounting and audit workflows processes.

“Open banking makes a big difference to processes by allowing you to aggregate data across various platforms. Accountants should talk to clients about using this to improve their everyday processes. It’s also becoming really useful in audits as accessing bank account information can be used to run analytics to identify anomalies, run verifications and match bank transactions to general ledger data,” says Toon. 

Jon Jenkins, founder of Hindsight, a tool that provides automated insights and alerts in accounting data, also believes efficiencies from open banking allow accountants to provide faster and cheaper delivery of client accounting data:

“Apps built using open banking have enabled quicker and cheaper delivery of client banking data. Accountants can now double-check and find errors with bank reconciliations faster.”

Jenkins also advocates how open banking has created new advisory opportunities with the proliferation of payment apps meaning that businesses require advice on integrations and the best tools to use. 

Variable Recurring Payments may take open banking to the next level

One development that has the potential to increase adoption levels further is Variable Recurring Payments (VRPs). VRPs are a type of open banking payment where the amount being collected can be variable and can be initiated on a recurring basis without account holders needing to reauthenticate permission for each transaction. In time, it is expected that VRPs will replace Direct Debits for the majority of small, recurring payments, which should lead to reduced friction and cost, and increased control for account owners.

The CMA9 banks are mandated to implement VRP APIs later this year. Initially, functionality will be limited to ‘sweeping’, which moves money between accounts. For example, this can be to ensure users generate the best rate of return for excess cash held. 

Jenkins believes that this will make it easier for accountants and their clients to manage funds better - generating higher returns and minimising costs:

“I love the idea of sweeping to avoid unnecessary bank charges and issues with returned payments if you can automatically move money around your accounts. Accountants could add real value to the client relationship with minimal effort by raising awareness of sweeping with clients.”

Awareness is important as adoption grows

While the absolute number of open banking users is still relatively low, the pace of adoption is quickening with one million users being added between September and January

Accountants should therefore consider monitoring further developments to ensure they are future-proofing their firm, delivering the best possible service to their clients and driving business performance.

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