Who’s Open to Open Banking?

  • Paul Fannon , Managing Director, Global Business Solutions at Bottomline

  • 08.07.2021 12:00 pm
  • #OpenBanking

Open Banking works for everybody – consumers, businesses and banks alike. Better service levels and user experience, improved security, faster payments and cost savings are just some of the benefits. So why, asks Bottomline’s Paul Fannon, MD of Global Business Solutions, is there a long-term decline in the number of businesses, particularly SMEs, preparing themselves for this brave new world.

For businesses of every size across the economy, what’s not to like about Open Banking?

First introduced in the UK in 2018, the initiative is mandated by the Competition and Markets Authority (CMA) to achieve straightforward aims: enabling innovation, improving service levels and increasing competition and value for banking customers, embracing individuals and businesses of every type, including small-to-medium-sized enterprises (SMEs).

Tech is at the heart of this ambition: by shifting to agile digital technologies, banks can support direct financial transactions between businesses and their customers and bring cross-platform payments to life.

Benefits for everybody

Thanks to this, end-customers would receive a slicker, smoother and more secure service. Businesses would gain from lower transaction costs and faster payments, as well as better customer conversion and retention rates driven by the enhanced user experience. And banks and other financial institutions would be able to compete harder for business customers.

Overall, these expectations are being met. Open Banking has already enabled the launch of a range of innovative services, powered by new technologies, that are clearly delivering multiple benefits for all parties.

Customers in control

For example, end-customers today can take better control over their finances and make properly informed decisions about managing their accounts. Just as important, they have access to payment services that make it unnecessary for them to share sensitive payment details, type in long card numbers or enter a billing address.

In short, the all-important checkout experience can be faster, easier, more transparent, more personalised and, above all, safer: essential considerations for any business seeking to differentiate itself from the competition.


Streamlined, simplified payment processes

But there’s little point in any business successfully delivering a great customer experience if it comes with a time and expense penalty. Open Banking scores here as well. In addition to those lower costs and faster payments, businesses can also hugely improve the range of payment options available to consumers. They can support the use of smart devices for making payments, accelerate remittance and currency exchange, offer customised product offerings and more – all streamlining and simplifying their processes at the same time as improving life for their customers.

The key to financial success

The Payments Strategy Forum predicts that just three initiatives enabled by Open Banking will give UK businesses the potential to save billions by 2031. These are:

  • Confirmation of Payee (CoP): a ‘behind-the-scenes’ validation process that matches the payee’s name against the recipient bank account to protect businesses and consumers against Authorised Push Payment fraud and misdirected payments
  • Request to Pay (RtP): a secure messaging platform providing a flexible and instantaneous way of settling bills, streamlining the payment process and driving down transaction costs
  • Enhanced Data: an upcoming overlay service that will make it easier for businesses to reconcile inbound payments through additional remittance advice information.

Better products, superior service

Businesses and consumers aren’t the only beneficiaries of the Open Banking revolution. Banks and other financial institutions are also gaining new advantages. Improved opportunities for collaboration are enabling them to innovate quickly and compete harder. They can act faster than ever before to continuously anticipate and respond to new customer expectations. And they can use new data streams to build insight and make better decisions. As a result, they’re building better product portfolios and improving service levels.

These benefits are around us all today and are set to become ever more powerful during the years ahead. It’s therefore no surprise that Open Banking is widely praised among banks, major enterprises, specialist consultants and other important interest groups.

But there is a problem.

A year-on-year decline

The market for Open Banking has grown fast, with more than 300 authorised online service providers being registered from scratch three years ago. And it continues to double every four months in the UK. Despite this growth on the supply side, there has been a year-on-year decline in the level of preparedness for several payment initiatives declared by the organisations surveyed for the Bottomline Payments Barometer. These include Open Banking, where the proportion of those claiming at least some extent of preparedness has fallen from around 65% in 2019 to just 55% in 2021.

The issue is more worrying when you look at the breakdown of respondents. A full two-thirds (66%) of participating enterprise organisations told us they were prepared to embrace Open Banking. But only 38% of SME decision-makers made the same claim.

So, close to two-thirds of SMEs – the backbone of our economy and the key drivers of recovery from the impact of the COVID-19 pandemic – are ill-prepared to seize the cost, efficiency and customer-experience benefits Open Banking delivers.

The question must be asked: why?

Time to junk the jargon

It clearly has nothing to do with a problem with Open Banking itself. Rather, we suspect, it’s due to the way new regulations are discussed, not just by the actual regulators but also the consultants and institutions that are supposedly there to help.

Jargon and uncertainty abound, both about the benefits to be expected and when they come into effect.

This is an incredibly important issue. At its most basic, there are billions of pounds in savings to be realised if many, many more companies of every size awake to the enormous benefits Open Banking can deliver, and treat it as an urgent priority.

As we all seek to recover from the impact of the pandemic, cash management has never been more important. Those businesses that fail to grasp the opportunities available are unnecessarily putting themselves on the back foot at a critical moment.


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