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What is Open Banking? | NatWest Rapid Cash

BY Rapid Cash
03 May 2022

What is Open Banking?

Technological innovations seem to proliferate each decade, and with each step forward – such as the invention of the lightbulb, or the internet, we learn about new ways in which technology can evolve.

One of the most significant milestone events to be aware of in the fintech space is open banking, which has truly reshaped how people interact with financial platforms and products. You’ll likely have reaped the rewards of open banking before; perhaps when using apps for mobile banking, financial advice, or product comparisons that connect with your business bank account.

Open banking sets out an API standard that the seven major retail banks in the UK must follow, and that standard allows third party service providers to interface with your banking data. From there, they could offer you a range of different products or services, that without API integration would not be able to give personalised quotes.

In this article, we’re going to detail exactly how open banking works, what you need to know about it, and how you may be able to leverage open banking to find new opportunities for your business.

PSD2 explained

The Payment Services Directive 2 is a set of European regulations that govern payment services for all organisations operating in the European Union. Essentially, this set of regulations aims to set a level playing field to promote fairness within the European single market.

Both open banking and PSD2 force banks to make current and historic customer data available to the wider market. This encourages third party service providers (TPPs) to tap into the newly accessible data (as of around 2018), and to offer new financial products to customers.

Before this regulation came into force, large banks almost exclusively had access to customer data - and could use that data to determine which customers to offer financial products to, as well as using it to inform the design and capabilities of those products. The open market we see now, however, brings about increased competition as TPPs battle the traditional banks to offer new benefits to customers at competitive rates.

PSD2 directive: What’s the latest news?

With Brexit occurring in 2020, questions arose around how EU-UK payments would work; which regulations still apply and how are these transactions governed? In fact, the rollout of PSD2 legislation in the UK was agreed upon before the Brexit negotiations came into play, and financial leads across the country have opted to continue with the regulation rollout - which helps to facilitate international trade.

So, we might expect to see open banking and PSD2 regulation rolled out and improved upon in the coming months and years.

What is an open banking API?

We mentioned the phrase ‘API’ in our introduction, which simply means ‘Application Programming Interface’. It enables communication between two software platforms, such as a major bank holding customer data and a cash flow management application that needs access to that customer data in order to draw insights.

Open banking apps

There are quite a broad range of apps that have been developed to improve both the way in which SMEs manage their finances and how they make financial decisions. Some notable examples include:

  • Accountancy apps - that automate some generic accounting processes, such as bookkeeping, which could be helpful if you’re looking to minimise the manual workload of a small team.
  • Cash flow management apps – which integrate with your business bank account and analyse your financial data to present you with quick insights at scale. These apps could be really helpful when it comes to cash flow forecasting.
  • Comparison apps – which analyse your business’ financial data before finding a range of products (based on your search criteria) that could help you grow and make efficiencies. Before open banking came into force, the range of products in market was significantly smaller.
  • Online lending services – for example our NatWest Rapid Cash solution utilises the open banking API. If eligible, our product connects with your business’ accountancy package to offer you a range of benefits that traditional invoice finance may not.

One great place to browse a list of open banking apps is on the official open banking website. Their ‘app store’ allows you to filter based on your business’ needs, so if you’re in the discovery phase of learning about the different open banking services that could benefit your business this may be a good place to start.

Open banking regulation

Our open banking article wouldn’t be complete without touching on regulation. In the UK, all open banking regulations are enforced by the Financial Conduct Authority; an organisation which aims to make the UK financial markets work well so that consumers can get a fair deal.

The FCA are responsible for upholding a range of regulatory standards, such as:

  • Promoting integrity within the UK markets.
  • Ensuring customers are protected.
  • Enabling fair competition.

Any breaches of open banking standards can be reported to the FCA, and it’s important that, as an SME owner, you know your rights.

For example, you are legally entitled to control over who your business data is shared with. If at any point you request that your bank stops sharing data with a TPP, this must be enforced by the bank. So, with your bank as a first point of contact, the FCA acts as a failsafe to ensure regulations are properly implemented.

We hope this article has helped broaden your understanding of open banking, and highlighted some of the exciting possibilities API integrations could bring about for businesses who are keen to grow and make efficiencies in all sorts of ways.

How could Rapid Cash help?

At NatWest Rapid Cash, we offer an online lending product for SMEs that is made possible by open banking technology. If you’re eligible, our innovative product can connect with your cash flow management software, before allowing you to choose which of your unpaid invoices you’d like to receive a cash advance for – meaning you may not have to wait 30, 60 or 90 days to be paid.

The line of credit that our new take on invoice financing provides could improve your cash flow management, and help you look to make small investments and efficiencies that drive your company forward. If you’re interested in learning more about Rapid Cash, read about how our solution works.


To be eligible for Rapid Cash you must be trading for more than 6 months, have an annual turnover of at least £100k and either be a Limited Company or Limited Liability Partnership in England and Wales. Additionally, you need to invoice other businesses and use one of the following digital accounting software: Xero, Quickbooks, Sage 50, Kashflow, FreeAgent and Netsuite. Security and guarantee required. Product fees may apply.

Rapid Cash

Rapid Cash offers a modern line of credit unlocked by your unpaid invoices, offering greater flexibility and automation than most traditional finance facilities.