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Want instant payment and automatic reconciliation? Why Open Banking is the compelling choice

Woman’s torso, arms and hands, at a laptop on a wooden table doing online Open Banking payments

As the UK copes with yet more macroeconomic challenges, what seems like the distant problem of Brexit still hurting some businesses today, followed by the Pandemic, then a Cost of Living Crisis and the Russian war fuelling supply and resource difficulties, businesses need to adopt Open Banking, and start collecting Open Banking payments, to not only stay afloat, but keep ahead.  

In this blog, we’ll go through:  

  • What are the common payment methods? 
  • What is Open Banking and what are Open Banking payments and Open Banking payment initiation?  
  • What are the benefits of Open Banking, and how do you get automatic reconciliation and instant money transfer?  
  • Why is Open Banking the compelling choice?  

What are the common payment methods?  

Whether you’re running a business or for those times when you’re the consumer or bill payer, there are a variety of payment methods we’re all familiar with:  

  • Direct Debit  
  • Card payments  
  • Bank transfers  
  • Cheques (if you remember them)!  
  • Cash  
  • Payments via payment facilitators like PayPal, GoCardless, Stripe, SumUp etc 

They work ok, but they all have disadvantages that cause pain points for businesses and consumers, and where an uncommon as yet service, Open Banking as a Service, is much better fitting.  

In recent Ordo research, we found:  

  • Businesses receive more than 20% of payments late 
  • 20% of business owners do not know how much it costs them to collect payment 
  • 40% use a payment facilitator like PayPal or Stripe and do not know how big a fee is deducted  
  • Nearly 10 hours per week is spent on payments and accounting because there’s no automatic reconciliation  

Given these problems, what would you pay to have automatic reconciliation, instant payment and instant money transfer?  

What is Open Banking, and what are Open Banking payments and Open Banking payment initiation 

How did Open Banking come about?  

Open Banking was brought into being by regulators as a competition remedy for a lack of competition amongst the banks. Open Banking is underpinned by legislation (the Payment Services Directive 2) and Open Banking payments are backed by government being used by the likes of HMRC.  

Some FinTechs, like Ordo, providing Open Banking as a Service and offering Open Banking payment initiation are authorised and regulated on an ongoing basis by the Financial Conduct Authority, so businesses can have trust and confidence that Open Banking as a Service providers are safe and secure.  

What is Open Banking 

Open Banking payments are quicker, lower cost, more secure and easier to facilitate than card payments, and they’re lower cost to track and more secure than bank transfers.  

Open Banking payments are effectively guided or facilitated bank transfers, where the risk of fraud and mistake are eliminated.  

  • Card payment substitution – instead of taking a card payment, which takes multiple working days to reach the collecting business and comes at a high cost to the business (which is invisible to the consumer so cannot influence their behaviour) – Open Banking payments are an instant payment method, received immediately by the business in cleared funds, for around 80% less cost to the business.  
  • Bank transfer substitution – instead of relying on your customer to make non Open Banking payments, where they have to (remember to) initiate the process, you hope your invoice hasn’t been fraudulently intercepted and tampered with en route to your client and that they input the account details correctly so the non Open Banking payments aren’t lost, and that they include the correct reference (which customers rarely do) so that you can reconcile that payment – Open Banking payment initiation means the customer simply clicks a secure tokenised link, QR code or ‘Pay now’ button in the business’ branding and which enables Open Banking payments which have already been set up for them and where they land, each as an instant payment, in the right account with the right reference with automatic reconciliation.  

How do Open Banking payments work?  

Open Banking payments are direct and instant payment taking the form of account to account payments – Open Banking payment initiation is instant money transfer, direct from a customer’s account to the collecting businesses account. There’s no middle man or woman, no card provider, payment facilitator or card or merchant acquirer that needs to take a cut of your revenue – Open Banking means instant money transfer, instant payment, with automatic reconciliation giving businesses more time and money and control over their profits and finances.  

There is no sign up, registration or app download by customers to pay using Open Banking, so there is no barrier for customer use of Open Banking payments.  

Businesses simply choose an Open Banking payment initiation provider – be sure to choose one that truly provides Open Banking as a Service – which is where the Open Banking payment initiation provider does all the tech, builds and designs the customer Open Banking payment screens and journeys and keeps track of each instant payment, leaving very little that the business needs to do or build to benefit from Open Banking.  

Once a business has connected via APIs to the Open Banking payment initiation provider to receive Open Banking as a Service, the businesses payment requests will be sent out, in the businesses branding, to their customers. Customers will receive a secure link, QR code or ‘Pay now’ button via email, text, WhatsApp, post or any other means a business uses. The customer simply clicks this secure Open Banking link that will look just like a communication from the business they know, and the Open Banking payments are there already set up for them by the Open Banking payment initiation provider, ready to be approved by the customer. No input of card details or account numbers, no missing or wrong references, just easy instant money transfer and automatic reconciliation.  

Why is Open Banking the compelling choice?  

With the benefits of Open Banking payments as outlined above: lower cost, instant payment, automatic reconciliation and the possibility that all this is run as a hosted and managed Open Banking as a Service for your business by the Open Banking payment initiation provider, it’s an easy way for business to cut their costs, whilst still delivering an even better service for their customers – a must have in today’s turbulent and uncertain times.  

If you want to know more about Open Banking as Service and start getting instant money transfer and automatic reconciliation of your payments, contact Ordo today and we’ll take you through everything Open Banking, Open Banking payment initiation and Open Banking as a Service for all your Open Banking payments needs.