Bank-funded prize backs OpenWrks to fix Business Current Account Switching

By David Coghlan | Dec 6, 2018 |

We’re incredibly thrilled and excited to be announced, again, as winners of the Nesta Open Up Challenge. At OpenWrks we’ve been on a journey with the Nesta team since the beginning and it’s encouraging to get their continued support as we try to create a better financial reality for the UK’s small businesses.

This latest win and the £250,000 prize will allow us to execute our most audacious plan, that we ultimately believe is the only way any meaningful change can happen in the business current account market.

But first, let’s rewind a little.

In 2016, after assessing the UK retail banks, the CMA found that there wasn’t enough competition amongst the UK's largest banks. The banks don’t need to work hard enough to get and keep their customers and as a result, there is a lack of innovation in the products and services being offered. This is true for consumers but SMEs, in particular, are being underserved and switching business current accounts (BCA) is almost non-existent.

This is the reason that the Open Up Challenge and it’s £5 million prize fund was born. To find and fund innovation that drives a massive and fundamental shift in how small businesses understand their own business bank account, easily identify the benefits of switching and then make the switch simple and as low risk as possible.

The Business Current Account market is broken

There are now almost 5.7 million small businesses in the UK, making up 99% of all businesses and they employ 60% of the UK's workforce (1).  But only 2000 of those SMEs switch bank accounts a month. That’s less than 1% of small businesses switching per year. For there to be any meaningful change to the BCA market that would begin to satisfy the CMA remedies, the number of switches needs to increase by at least 10 times.

However, the current environment is inherently skewed away from that becoming a reality for a number of reasons.

  1. Small businesses don’t switch because there’s no easy way for them to calculate the benefit of switching.
  2. Switching is complex, long-winded and fraught with potential risk to the business.
  3. Banks don’t pay incentives to business customers like they do in the consumer market.
  4. There are insufficient bounties or incentives for introducers of small business customers because the banks don’t need to acquire new small business customers.

The future has to be different

If SMEs are given a clear return on investment that is personal to their business. If they are presented this offer as part of a transparent comparison of all BCA products at the right time and place. If they are given a cash incentive and the process of switching is seamless and as low risk as possible. They will switch.

All of these requirements will not be delivered through yet another comparison website (believe us, we’ve already tried this.) At OpenWrks we offer a radical alternative that we believe will drive competition, power better banking services and improve the lives of SMEs.

OpenWrks vision

We have built the infrastructure to unlock the power of Open Banking, not for us, but for the 1000s of third parties servicing the SME market to provide a fair and accurate comparison of BCA and overdrafts to their SME customers anywhere and at any time, for free. Only by making BCA product comparison available through as many market participants as possible can the dynamics of the BCA market change and kick-start BCA switching.

From challenger banks to comparison engines like moneysupermarket, accounting packages like Xero or through other Fintech disruptors,  we believe the BCA comparison tool needs to be available and visible in as many places as possible. We don’t think it’s right or even commercially viable to be one party simply fighting for BCA switching deal flow. We want to be able to facilitate all BCA switching deal flow, putting BCA switching in front of SMEs at exactly the right place and at the right time.

How will this work?

To make BCA switching technically possible there are 7 core components / capabilities that any business looking to provide this service will need to build:

  1. Get hold of BCA product information so they know what BCA products cost
  2. Get hold of SME bank transaction information so you know how the SME uses their account
  3. Enable the SME to share this data
  4. Make the data the SME shares use-able and useful
  5. Make the service easy for the market to integrate with
  6. Turn the service into a great customer experience
  7. Show the customer if they will be approved for a new business current account

OpenWrks has already built 6 of these 7 and having won the Open Up Challenge will be bringing this capability to market in Q1 2019.  

Will it be sustainable?

From painful experience, we know it is not viable to build a stand-alone BCA comparison service because BCA providers do not pay sufficient bounty for referrals. However, the only way to scale a comparison service is to make it available to all market participants with no upfront or fixed costs.

As we have done all the hard work on the tech integration to a single point of integration, we will cut the commercial deals with product providers so our clients can simply present the service to their customers and then split the switching revenue 50/50 with us. This will align incentives to drive market adoption. During the last 6 months, we have built a pipeline of potential funding sources by taking advantage of the new money flowing into the SME banking market, including the RBS Alternative Remedies package which is pumping £425m of funding into the market specifically aimed at increasing competition in the SME banking market. We are already in advanced negotiation with a leading challenger bank to partner to launch the proposition and working with just one challenger bank means we can reach more SMEs than 10 direct to SME websites can at zero cost to acquire.

Why OpenWrks?

Success from the Open Up Challenge is not that a new BCA comparison site exists. Success is a more competitive banking market, better banking services and more importantly happier better served SMEs empowered to be more productive and profitable by the tech that we have created.

By backing OpenWrks solution, the Open Up Challenge and the CMA have placed a bet on the whole market, rather than just a single Fintech or comparison website. We believe it’s the only way that wider competition in SME banking can be achieved and better services offered to SMEs. It is now reliant on us here at OpenWrks and every other business that serves small businesses to make that vision for small business banking a reality.

1. Parliament business statistics https://researchbriefings.file...

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