If you’re involved in business you’ll know that keeping your venture profitable is being challenged right now. Gone are any boom days of guaranteed repeat payments from customers, and as for invoice reconciliation, why do we have ChatGPT artificial intelligence writing perfect essays (although not this blog!) but still no easy payment solutions for reconciling accounts?
With domestic and global events occurring one after another, from Brexit headlines being overshadowed by the COVID 19 pandemic health alerts to the Russian war on Ukraine, a recession is intensifying a cost of living crisis and putting pressure on businesses. This constant barrage of challenges is pushing businesses to their limits, and their already cash strapped belt tightening customers reluctant to make more payments than are strictly necessary.
Given these ongoing macroeconomic stressors, it was not surprising to find in a recent Ordo survey that:
- business owners spend nearly 10 hours per week dealing with accounts and payments as part of invoice reconciliation tasks;
- late payments are a perennial problem; and
- payments, accounting and invoice reconciliation is the most hated part of running a business.
Introducing Open Banking payment initiation and Open Banking as a service
What is Open Banking? Open Banking is new technology that allows FinTechs who are authorised by the Financial Conduct Authority (the FCA) to provide innovative, efficient and helpful payment solutions to business and organisations. The technical term for these payment solutions is: Open Banking payment initiation.
These Open Banking payments are underpinned by technology enabled by legislation (the Payments Services Directive 2, enshrined in UK payments law by the Payment Services Regulations 2017). Open Banking payments initiation is also endorsed and encouraged by the UK government; it was implemented by way of the UK’s competition authority, the Competition and Markets Authority (the CMA), mandating the 9 largest banks in the UK to adopt Open Banking payments initiation capability allowing FinTechs to offer Open Banking payments and Open Banking as a Service to their customers to ensure the mainstream usage of Open Banking payments and the success of Open Banking in the UK. Not only that, the UK is now leading the world in payments for its Open Banking functionality, and the UK has multiple Open Banking providers offering a range of services from tech APIs only and Open Banking payments initiation, to one provider, Ordo, offering Open Banking as a service…. and all of this Open Banking technology and functionality means invoice reconciliation can now be a whole lot more streamlined, saving businesses time and money.
What are the benefits of Open Banking payment initiation, and how do Open Banking payments help invoice reconciliation?
When it comes to payments and invoice reconciliation, there are 5 top features of Open Banking that every business needs to know about. Open Banking payments come with the following as standard payment solutions for the purposes of invoice reconciliation headaches:
- as the business collecting payments, you input the exact account number and sort code to be credited – no more lost payments or payments going to the wrong sub-account;
- Open Banking payments not only land into the correct payment account of your choice, but they arrive automatically and correctly referenced – no more payments entries as ‘gas bill’ for energy companies, for example, and crucial for streamlining invoice reconciliation;
- Open Banking payments are credited to the correct payments account, automatically with the correct reference matching your invoice reconciliation data, for the payment amount you’re expecting – there is no deduction of fees in your payments received, all the payments made through Open Banking payment initiation are credited to your payments accounts in full;
- Open Banking payments are credited to your accounts in cleared funds in real time, often instantly, not several working days later as with card payments, meaning invoice reconciliation can be correct up to the minute with no more looking back through purchase orders for what payments related to what invoices in order to complete your invoice reconciliation; and
- Some Open Banking providers that offer Open Banking payment initiation services are integrated with QuickBooks, Xero and Sage, meaning businesses can run their books from these accounts packages, and then seamlessly attach their invoice when securely requesting an Open Banking payment, meaning invoice reconciliation really couldn’t be easier.
How do Open Banking payment initiation services work?
Open Banking and, particularly Open Banking as a Service providers like Ordo, operate via APIs – Application Programme Interfaces. Some Open Banking payment solutions will be just tech APIs, and others, like Ordo, are Open Banking payment initiation services that operate Open Banking as a Service and will handle far more of the build and tech for a business than just a tech payments solution.
A business integrates the Open Banking payment initiation APIs, and the business is then able to send secure payment request messages to their customers for their payments. The Open Banking payments request messages can be sent by email, text message, WhatsApp or other data messaging service or by post, and can appear to the customer as a secure one time use tokenised link, a QR code or ‘pay now’ button. The customer clicks the secure link or ‘pay now’ button or scans the QR code and they will be taken to their bank where the Open Banking payment
initiation provider has already set up the payment for them to approve. The payment request appears in the businesses branding so it’s easy for the customer to recognise.
Within a few clicks, the paying customer can approve Open Banking payments and the money will transfer directly from their bank account to the businesses bank account instantly, and will land correctly referenced in the right account: Invoice reconciliation at its simplest.
What’s Open Banking as a Service, as opposed to Open Banking payments?
If you’re a tech company that has lots of people to keep busy with Open Banking integration and tech build, you may be happy with a more tech focussed Open Banking provider. Integration will likely be more complex, costly and time consuming, and you will be left with the screens and customer journeys to build yourself, and the management of ongoing payment agreements if you run a subscription business or need to take repeated Open Banking payments.
If your business is not so tech focussed, you’re likely to want a simple and efficient integration and benefit from an Open Banking as a Service provider that will build all the customer screens and journeys in your branding with your logo, and who will fully host and manage the ongoing payment agreements. Ordo is an Open Banking as a Service provider and, as such, integration can be completed in a matter of weeks, with very little build for a business to do and next to no continual payments management….all there will be is lots more time from your far more efficient invoice reconciliation process, time you can spend on growing your business instead of managing payments.
Will Open Banking as a Service solve your invoice reconciliation headaches?
If you’re a business that wants to streamline its invoice reconciliation process, you’ll likely benefit from Open Banking as a Service. It’s safe and government backed technology, provided by FinTechs that are authorised by the FCA.
If you’re interested in gaining back those 10 hours per week your team may be spending on invoice reconciliation, payments and searching for better payment solutions, give Ordo a call and we’ll talk you through the various Open Banking payments options.
It could just be the shortest 10 hours you’ll ever spend on invoice reconciliation matters!