19th August 2019
By Sharmini Woodings, Partner
Open Banking has been around since January 2018. But in September it will be back in the spotlight thanks to the EU’s Second Payment Services Directive or PSD2.
Under PSD2, Open Banking will apply to every bank. This means business owners who use cloud accounting software, and utilise the automatic bank feed feature, will soon experience some changes.
The point of the new standards is to give consumers greater control over their financial data. While at the same time encouraging increased competition in the banking industry.
Open Banking is a form of API (application programming interface). It allows third parties access to financial information efficiently but you retain control. You don’t need to reveal your password or any other sensitive details to anyone. So this is a big improvement on the first generation of information sharing tools.
With the arrival of Making Tax Digital many more business owners are switching to a cloud based accounting solution. Many have set up bank feeds which help speed up tasks such as the bank reconciliation by importing bank transactions which can then be matched up in the accounts. However, some bank feeds will be withdrawn in light of these changes and replaced.
Barclays and UK and EU bank feeds set up to use Yodlee will no longer be available. This means that if you are using one of these bank feeds you will need to change to an appropriate new one as and when it becomes available. Their availability is being staggered and we will have access to some from August. But we may have to wait a little longer for some of the others including beyond 14 September.
If you find that the bank feed you need isn’t immediately available, you can manually import bank statements while you wait. You will need to download them in either OFX, QIF or CSV format from your online banking.
Alternatively, once your new connection is available you can import the backlog of transactions. The good news is that you can import historical transactions. These can be up to 12 months in the case of Xero and up to 24 months for QuickBooks. Although we don’t recommend that you wait this long.
If you don’t update your bank feed and it is one affected by the changes, then your transactions will stop being imported into your cloud accounting software package.
Most cloud accounting software companies will send their customers a message to let them know when it’s time to change. Or they will notify you via your dashboard. If you’re not sure which bank accounts you have connected to a bank feed, you can tell by looking at the logo next to your bank account on your screen or dashboard.
Keep a look out for these notifications and don’t ignore them!
Yes, every 90 days after you connect your new bank feed, you will be asked to re-authenticate it. You’ll need to have your online banking credentials to hand as you’ll need to enter them. It’s a straightforward process only requiring a few minutes of your time.
The last 18 months have seen so much change. But there are some positives for consumers particularly as regards security and improved competition. In the meantime, familiarise yourself with what you need to do and if you’re unsure, get in touch.
Sharmini is Wise & Co’s managing partner. She joined the firm in 1989 and became a tax partner in 1997. Sharmini specialises in providing owner managed businesses with strategic consultancy and tax advice. She has advised on company restructures, mergers and demergers, acquisition and disposals, and management buy-outs. She is first class communicator, which is essential to delivering the high quality service that Wise & Co prides itself on.