As an SME, you should always be looking for ways to improve your business operation with the use of tech. These days, one of the best ways that you can do this is with online banking and there are a handful of benefits to utilising open banking when running a business.
What is Open Banking?
First, it is important to define exactly what open banking is. Essentially, open banking is the process of banks and other financial services making data available so that data can easily be shared with third parties (when the consumer chooses to allow this). There are many times when this might prove to be useful, such as linking a budgeting app to a bank account.
How Open Banking Works
Open banking works by consumers allowing control over what data they share and is accessible to businesses. This first came into prominence in 2015 with PSD2, which stated that third-party providers (TPPs) should be allowed to make payments on behalf of their customers. In 2016, the CMA mandated that the UK’s 9 main banks had to comply with these regulations.
Open banking works with application programming interfaces (APIs) that allow one program to offer services to another program. Essentially, APIs allow software to “communicate” with one another, which will include the transfer of data like the account holder’s name, account number etc.
Benefits for Businesses
So, what are the benefits of using an open banking platform for businesses?
Lower Fees
One of the main benefits is that open banking takes the cost out of processing payments for merchants. Financial benefits are always important and being able to make savings on processing payments could make a big difference.
Quicker & Contactless
You will find that it can take a few days for card and direct debit payments to settle, but with open banking, this is not an issue with instant settlements being made. This ensures that the money is available when needed and it can make financial management much easier. On top of this, open banking is contactless, which is a major perk in a time when so much of life is contactless.
Extra Security
Cybercrime is a major issue right now and one that businesses need to take seriously. Open banking can provide extra security and reduce fraud with more secure transfers.
Cut Back on Admin
Another important benefit of open banking for small businesses is the fact that it can cut back on admin. This is because customer data is immediately available and you do not have to manually upload documents.
Open banking has been a game-changer for businesses by changing the way in which businesses process payments and manage their finances. SMEs should always be looking for ways to embrace and utilise the best and latest tech and open banking is something that all small businesses can benefit from.
