The Open Banking movement is setting the stage for future SMBs

By Puja Sharma

It’s getting easier for small business owners to adjust to a new paradigm where business is anything but usual. Several companies have had to reorient their businesses in some way or another to survive – and those changes are costly, According to the Mastercard’s report on “Empowering Small and Mid-sized Business Growth by Unleashing Its Data: The Rise of Open Banking and the Importance of Cybersecurity amidst Cost Uncertainty.”

With a rising cost of goods, the infrastructure needed to implement new business models, or simply purchasing large amounts of PPE, small business owners are feeling the squeeze. Most small business owners have received a business loan (62%) and are looking for faster and easier access to capital (85%).

Although rising costs, inflation, and a shortage of talent continue to challenge small business owners, the owners remain optimistic and ready to grow. Almost half (47%) say they are in growth mode, with the remainder (42%) in maintenance mode.  Small business owners need customized funding solutions that are agile as they scale. Almost all (85%) small business owners said they wanted easier access to capital and loans that were tailored to their business’ needs (81%).

In a shifting economy, small business owners crave solutions to navigate their way through low-interest loans, credit card options, or micro-loans. Small business owners desire solutions to navigate a shifting landscape.

Rise of Open Banking

With eCommerce and remote team meetings, digital expertise has been added to business operations thanks to the pandemic. Small business owners have enhanced their financial IQ over this time as 95% consider themselves heavy FinTech users both for business and for personal usage. Technology is now used by small business owners for a variety of tasks to help them stay organized.

Banking, payments, and budgeting, among other everyday tasks, are already conducted on digital platforms, to expand to more advanced applications like loans and crowdsourcing. A new generation of business owners is now taking advantage of open banking for business due to the growing use of fintech among small business owners.

It is expected that in the coming years, open banking will spread to a range of financial needs, with more than 7 in 10 small business owners linking financial accounts for invoicing, banking, paying bills, receiving payments, and accounting. SMB owners are embracing open banking as a key member of their team, with many considering it to be a way to boost their competitive advantage. The majority of respondents intend to use their data to get customized financial recommendations for their business. According to the data, one of the top reasons they are moving to open banking is to improve their decision-making process, followed by saving time.

FinTech use is on the rise, but 94% of small businesses report financial stress and pain. Access to capital, financial management, and rising costs are cited as stressful aspects of running a small business. There are several pain points that small business owners are seeking allies to address. Businesses are looking for better ways to make sense of their data, optimize financial management, and inform business strategy. Despite their openness to receiving help, the majority of them (63%) say they trust others for help with financial planning for their business and (85%) seek customized recommendations about how to optimize their finances.

Key takeaways

• Open banking puts small business owners in control and allows them to benefit from their financial data to tackle critical business tasks.
• Small business owners are looking for financial solutions customized to their needs and to ease the financial pain points of operating a small business.
• More than 9 in 10 are heavy users of FinTech for both personal and business finances.
• Open banking technology offers more ways to pay with greater speed, convenience, and confidence for SMBs.