Open Banking Business Accounts UK: How It Works and Which Banks Support It

Key facts: open banking for business accounts

• Open banking for business accounts enables third-party software to read transaction data and initiate payments using FCA-regulated APIs
• All nine CMA9 banks are legally required to provide open banking access under the CMA Retail Banking Market Investigation Order 2017
• The primary use case for business accounts is accounting software integration - Xero, QuickBooks, FreeAgent, and Sage all use open banking feeds
• Payment initiation via open banking (paying a supplier directly from accounting software without logging into the bank) is available at most major providers
• Open banking connections are read-only by default for data feeds - payment initiation requires explicit separate authorisation

What is open banking for business accounts

Open banking for business accounts is a framework that allows FCA-authorised third-party providers (TPPs) to access a business bank account's transaction data and, with explicit authorisation, initiate payments on behalf of the account holder. The framework is built on standardised APIs governed by the Open Banking Implementation Entity (OBIE) and regulated by the FCA under the Payment Services Regulations 2017.

For UK businesses, open banking has two primary applications. The first is account information services (AIS): accounting software such as Xero, QuickBooks, FreeAgent, and Sage connects to the business bank account and automatically imports transaction data in real time or near-real time. This eliminates the need to manually export bank statements and import them into accounting software. The second is payment initiation services (PIS): certain software platforms can initiate payments directly from the business account without the business owner logging into the bank separately, using the bank's own authentication flow for each payment.

Open banking was mandated for the nine largest UK banks (CMA9) by the Competition and Markets Authority following the 2016 Retail Banking Market Investigation. The mandate took full effect in 2019. Digital-first providers including Starling, Monzo, and Tide adopted open banking voluntarily alongside the CMA9 mandate, and in many cases implemented it earlier and more comprehensively than the CMA9 banks.

Open banking business account options

Source: CMA Open Data API and provider published rates, 09 Jun 2026. All CMA9 banks must provide open banking access under the CMA Retail Banking Market Investigation Order 2017.

How open banking accounting software connections work

The connection between a business bank account and accounting software via open banking works as follows. In the accounting software, the user navigates to the bank accounts or connections section and selects their bank from a list of open banking-enabled providers. The accounting software redirects to the bank's own login and authentication page. The user logs in and explicitly authorises the connection, specifying which accounts to share and for how long. The authorisation is time-limited - typically 90 days under the Payment Services Regulations 2017 - after which it must be reconfirmed by the account holder.

Once connected, transactions import automatically. Most connections import new transactions within minutes of them posting to the bank account, though some providers batch imports every few hours. The accounting software receives transaction amounts, dates, counterparty names, and references. It does not receive login credentials, card numbers, or the ability to move money (unless payment initiation has been separately authorised).

The 90-day reauthorisation requirement under PSD2 was a known friction point for accounting software users. The FCA confirmed in 2023 that it would not extend the 90-day rule for variable recurring payments (VRP) used in open banking, but the industry has moved toward smoother reauthorisation flows within the existing rules to reduce disruption to accounting software feeds.

Open banking and Making Tax Digital

HMRC's Making Tax Digital programme requires businesses to maintain digital records and submit tax returns using compatible software. MTD for VAT has applied to all VAT-registered businesses since April 2022. MTD for Income Tax Self Assessment (MTD ITSA) applies to sole traders and landlords with qualifying income above £50,000 from April 2026, and above £30,000 from April 2027.

Open banking is the practical enabler of MTD compliance for most small businesses. The open banking connection between the business account and MTD-compatible accounting software provides the digital transaction records that MTD requires, without the need to manually enter transactions. For sole traders without dedicated accounting software, several HMRC-approved free apps use open banking to pull bank transactions directly for MTD submissions.

Businesses that have not yet connected their bank account to accounting software should do so before their MTD start date. The connection takes under 10 minutes to set up at any major open banking-enabled provider. Mettle (NatWest) includes FreeAgent at no cost for qualifying customers, providing a fully integrated free-account plus MTD-compatible software solution for eligible sole traders and small limited companies.

Open banking payment initiation for businesses

Payment initiation services (PIS) allow authorised third-party software to initiate payments directly from a business bank account. For businesses, practical PIS applications include paying supplier invoices directly from accounting software without switching to the banking app, bulk payroll payments initiated from payroll software, and automated VAT and PAYE payments to HMRC triggered by tax software.

Payment initiation requires separate, explicit authorisation from the account holder for each payment or payment series. The bank's own Strong Customer Authentication (two-factor authentication) is required for each initiated payment, providing the same security as a payment made directly through the bank's own app. Payment initiation does not give the software provider ongoing access to move money without per-payment authentication.

Open banking security: what businesses need to know

Open banking connections are FCA-regulated and use token-based authentication rather than sharing login credentials. When a business authorises an open banking connection, the bank issues a time-limited access token to the third-party provider. The third party never receives the business's bank login credentials. The access token can only be used for the specific permissions authorised (read transactions, initiate payments) and expires after the agreed period.

Businesses should only authorise open banking connections to FCA-registered account information service providers or payment initiation service providers. The FCA register at register.fca.org.uk allows verification of any provider before authorising access. Major accounting software platforms including Xero, QuickBooks, FreeAgent, and Sage are all FCA-registered AISPs. Revoking an open banking connection is straightforward via the bank's app settings and takes effect immediately.

Open banking versus traditional bank feeds: the difference

Before open banking, accounting software used screen-scraping or manual CSV imports to access bank transaction data. Screen-scraping required sharing bank login credentials with the software provider - a practice that violated most banks' terms and conditions and created security risks. Open banking replaced screen-scraping with standardised, secure, consent-based API access.

The practical difference for businesses is reliability and security. Open banking feeds are more stable than screen-scraping feeds because they use direct bank APIs rather than mimicking a browser session. They are more secure because no credentials are shared. And they are more comprehensive because the data is provided directly by the bank in a standardised format rather than scraped from the interface.

Variable recurring payments and open banking

Variable recurring payments (VRP) are a newer open banking payment type that allows software to initiate recurring payments of varying amounts on behalf of a business, within pre-agreed limits, without requiring per-payment authentication. The CMA9 banks were required to implement VRP for sweeping (moving money between accounts at the same bank) from 2022. Broader commercial VRP use cases are in development and are expected to enable subscription billing, payroll, and automated tax payments via open banking in future.

For business account holders, VRP is most relevant for automated sweeping between current and savings accounts, and for future payroll or supplier payment automation. The practical availability of VRP for business purposes beyond sweeping is limited as at 09 Jun 2026 but is a developing area of open banking capability that is likely to expand over the next two years.

Open banking for accountants and bookkeepers

Accountants and bookkeepers working with small business clients use open banking connections to access client transaction data directly in accounting software, without the client needing to manually export and send statements. Most accountancy practices using Xero, QuickBooks, or Sage ask clients to authorise open banking connections as a standard part of the onboarding process.

The FCA-regulated open banking framework means accountants access client data through the same secure token-based connection as any other authorised third party. The client can revoke the connection at any time. The accountant cannot initiate payments - only the account information service permission is required for bookkeeping purposes. Payment initiation is a separate permission that accountants do not typically need.

Frequently asked questions

What is open banking for business accounts?

Open banking for business accounts allows FCA-authorised third-party software to access transaction data and initiate payments using standardised bank APIs. The most common business use case is connecting accounting software such as Xero, QuickBooks, or FreeAgent to the business bank account for automatic transaction imports. All nine CMA9 banks are legally required to provide open banking access. Digital-first providers including Starling, Monzo, and Tide also provide full open banking connectivity.

Do all UK business bank accounts support open banking?

All nine CMA9 banks (Barclays, HSBC, NatWest, Lloyds, Santander, Nationwide, Danske, AIB, Bank of Ireland) are legally required to provide open banking under the CMA Retail Banking Market Investigation Order 2017. Most digital-first providers including Starling, Monzo, Tide, and Revolut also support open banking voluntarily. Smaller niche providers may not support all open banking standards - check directly with the provider before opening an account if open banking connectivity is a requirement.

How do I connect my business bank account to Xero via open banking?

In Xero, go to Accounting, then Bank Accounts, then Add Bank Account. Search for your bank name and select the open banking connection option. Xero redirects to your bank's login page. Log in, review the permissions requested (read transaction data), and confirm authorisation. Transactions begin importing automatically. The connection must be reauthorised approximately every 90 days under FCA rules.

Is open banking safe for business accounts?

Yes. Open banking connections use FCA-regulated token-based authentication. No login credentials are shared with third-party software. The access token is time-limited and permission-specific. Connections can be revoked immediately via the bank's app. Only authorise connections to FCA-registered account information service providers, verifiable at register.fca.org.uk.

Does open banking work for Making Tax Digital?

Yes. Open banking is the practical foundation of MTD compliance for most small businesses. The connection between a business bank account and MTD-compatible accounting software provides the digital transaction records HMRC requires. MTD for VAT has applied since April 2022. MTD ITSA applies to sole traders with qualifying income above £50,000 from April 2026 and above £30,000 from April 2027.