What Is Open Banking and Should You Trust It?

Open banking lets lenders see your transaction data securely - but most business owners avoid it because they think it means losing control of their accounts. That's not true, and the misunderstanding can cost you time and money. Here's what you need to know.

You've been sent an open banking link from your lender. You're staring at it, cursor hovering, wondering if clicking means handing over the keys to your business account to some third party you've never heard of.

So you close the email. You tell yourself you'll deal with it later. You don't.

That hesitation could be costing you.

What open banking actually is

Open banking lets you share your banking data securely with authorised third parties. That's it.

You're not giving anyone access to move your money. You're not signing away control of your account. You're showing them a read-only view of your transaction history so they can assess your business properly.

Think of it like this: when you apply for a mortgage, you hand over payslips and bank statements. Open banking does the same thing, except it's instant, more accurate, and you don't have to print anything.

The data flows through secure APIs - application programming interfaces - which are regulated and monitored. Every company that can request this data must be registered and approved. You can check the Open Banking Directory yourself if you want proof.

The myth about control

The fear most business owners have is that someone else will have access to something deeply private. Your transactions. Your cash position. Your financial weak spots.

But here's what you need to understand: you already share this data constantly.

When you send bank statements to a lender, you're sharing it. When you give your accountant access to your Xero feed, you're sharing it. When you apply for credit and hand over your accounts, you're sharing it.

Open banking just makes that process faster and more secure. You can revoke access anytime - through your banking app, through the third party's platform, or by contacting your bank directly.

Nobody can take money out. Nobody can set up payments. Nobody can change anything. They can look. That's all.

What saying no actually costs

We had a client paying 3% per month on short-term finance. High risk, high cost, because it was quick and easy to get without sharing much data.

They were nervous about connecting via open banking. Didn't like the idea of sharing their data. We explained what it actually meant, they connected, and within a week they had access to flexible invoice finance and longer-term options at 1.49% per month.

That's a drop from 36% per year to under 18%. On a £100,000 facility, that's saving them £18,000 annually.

They were limiting their options because of a misunderstanding. You might be doing the same.

Lenders use open banking because it gives them a clearer, real-time picture of your business. They can see your cash flow, your payment patterns, your stability. That means they can offer better rates and longer terms to businesses that look healthy.

If you refuse to connect, they may assume higher risk. Higher risk means higher rates, shorter terms, or no offer at all.

How it works in practice

When a lender sends you an open banking link, here's what happens:

You click the link. It takes you to a secure portal.
You select your bank from a list.
You log in using your normal online banking details. The lender never sees these.
You confirm which accounts you want to share and for how long.
Your bank sends the requested data directly to the lender. The connection is encrypted.
The lender reviews your transactions and makes their decision.
You can revoke access at any time through your bank's app or website.

The whole process takes about three minutes.

What can actually go wrong

Let's address the hacking concern directly, because it's valid.

Could someone intercept your data? Technically, yes. But the infrastructure behind open banking uses the same level of encryption as online banking itself. If you're comfortable logging into your bank account online, the risk level here is the same.

Could a rogue company misuse your data? Also technically possible, but every company offering open banking services must be authorised by the Financial Conduct Authority. If they're not on the Open Banking Directory, your bank won't let them connect.

Could you accidentally give access to the wrong company? Yes, if you click a phishing link. This is why you should only use open banking links sent directly from known, trusted sources - like us, or a lender we've introduced you to.

The actual risk is lower than the risk of emailing unencrypted bank statements as PDFs, which is what most businesses do anyway.

If you're uncomfortable, call us first. We'll walk you through it. But understand that refusing to connect is the same as refusing to send bank statements - except slower and less secure.

Why lenders prefer it

Lenders like open banking because it's harder to fake.

Bank statements can be edited. PDFs can be altered. Screenshots can be manipulated. Open banking data comes direct from your bank with no room for tampering.

This isn't about them not trusting you. It's about them having confidence in the data, which means they can offer better terms.

The businesses that connect via open banking get decisions faster, access better rates, and unlock products that wouldn't otherwise be available to them.

Final thoughts

Open banking isn't going away. It's becoming standard across UK lending.

You can keep avoiding it, keep sending PDFs, keep limiting your options. Or you can connect when asked and access the better finance products that come with it.

The choice is yours. But the cost of saying no is real, measurable, and growing.

If you have questions about a specific open banking request, or you want to talk through what data you'd be sharing, contact us. We'd love to help.

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