Small businesses could win up to 5m pounds through new API banking incentive
The UK's small businesses could avail of prizes up to the value of £5m through a change to the new Open Banking API system, as innovation foundation Nesta launches its Challenge competition.
New rules due to be introduced by the Competition and Markets Authority have been put forward to make it easier for banking customers to change their bank accounts and avoid overdraft fees, but they have been criticised by many for not going far enough.
The Challenge has been implemented by Nesta as a new incentive for smaller banks to sign up to the new open banking system, known as "Open API". It will enable the development and delivery of comparison and advice websites.
Twenty businesses will receive an up-front payment of £50,000, as well as a share of £3.5m in further funding if they succeed during the competition.
In addition, the firms will also gain access to fully funded technical and business support from industry leaders.
Head of the Open Up Challenge at Nesta, Chris Gorst, said that the new banking systems will be beneficial for both banks and customers.
"Open Banking has the potential to transform small business banking, leading to a step change in innovation and offering busy customers unprecedented transparency, convenience and control," Gorst said.
"The Open Up Challenge aims to make this a reality, by supporting innovators building next generation services centred around small businesses' needs."
Mike Cherry, the head of the Federation of Small Businesses, welcomed the introduction of the new scheme.
"We have consistently pushed for greater competition and choice in the small business financial market and believe that this is an issue that still needs resolving," said Cherry. "I am delighted to be working with Nesta and the FSB will play a part to ensure the chosen option is clear, user-friendly and is inclusive of the smallest businesses that need the most help."