Open Finance: A new frontier for SMEs

By Mark Horwood-James, below, Managing Director of Personal Finance Technology, Moneyhub

For SMEs, staying ahead in financial services technology has become a critical challenge, especially as the landscape shifts towards Open Banking and Open Finance. This evolution signals a new data-sharing and collaboration period across banks, financial services and third-party entities, fundamentally altering digital transformation strategies. For SMEs, this change emphasises the importance of considering outcomes and objectives before deciding on technological developments internally or seeking external solutions.

Historically, deciding between developing in-house tech solutions or opting for off-the-shelf products presented a clear, binary choice. Open Finance, however, introduces a model of openness and interoperability, suggesting that true success hinges on focusing on the end impacts and customer experience before tapping into the potential of internal and external resources. This integrated approach fosters innovation and efficient data flow, compelling SMEs to look beyond the confines of proprietary systems.

For SMEs venturing into Open Finance, the journey involves several critical considerations:

  • Open Finance elevates the importance of swiftly launching products. Given the fast-evolving financial technology landscape, companies must evaluate if in-house development or external acquisition offers the quickest route to market.
  • Decisions must support long-term objectives. Whether building or buying, choices should bolster the company’s market positioning, customer satisfaction, and revenue goals, ensuring technology investments advance the firm’s overarching success.
  • Solutions must adapt to future trends and scale with growth, necessitating an assessment of their evolutionary capacity within Open Finance’s broadening scope.
  • Tailoring services to specific needs demands customisation capabilities in bespoke developments or modified external solutions.

Emerging as a viable third route is a hybrid solution, enabling SMEs to leverage core strengths while engaging in strategic partnerships to enhance offerings and accelerate market introduction. This approach goes beyond technological innovation to reimagine customer interaction. Open Finance places a premium on understanding and fulfilling customer demands, benefiting consumers and businesses. SMEs that effectively respond to their customer’s needs, supported by interoperable platforms like Moneyhub, stand to gain a competitive edge.

Yet, embracing Open Finance presents challenges, including navigating a complex regulatory environment. The aim is safe and reliable consumer innovation, blending in-house and external efforts within regulatory confines.

The traditional “build vs buy” debate is evolving in the Open Finance era, shifting focus towards differentiation, responsible innovation, and delivering customer value. This paradigm shift encourages SMEs to adopt more flexible, customer-focused, and adaptable business models. Regardless of the method—building, buying, or a combination—Open Finance offers a unique opportunity for SMEs to lead in the transformation of financial services. It’s an exhilarating time for businesses ready to embrace change and explore new collaboration and innovation avenues.