In the future, customers and businesses may experience significant changes in the banking ecosystem.
Artificial intelligence (AI) played a significant role in the development of financial technology (FinTech) that has improved financial management systems.
Business owners can focus on their other responsibilities and operations as a result of technological advances in banking and completing financial transactions.
What is Open Banking?
Open Banking refers to the practice of giving Third Party Providers (TPPs) access to your financial information in a simple yet secure manner. It was created not just to protect customers, but also to pioneer innovation in the Banking and Financial services sector.
( Also Read: Digital Banking – A Complete Guide )
Benefits of Open Banking for SMBs
Consumers and SMBs can benefit from open banking when they take advantage of the system. Data is made easily accessible to individuals at any time when they need it.
Compared with traditional banking, SMBs can benefit from the following advantages.
Efficient and seamless business processes
Keeping up with small to medium-sized businesses is a challenge. Accounting, payroll management, and auditing are essential for business owners to do so effectively. Open Banking can assist Small Business owners in doing so. For small and medium businesses, it facilitates access to financial data by financial institutions.
As a result of delegating these responsibilities to an external party, SMB owners can devote more of their energies to improving relationships with employees, overseeing marketing efforts, and enhancing their service offerings.
Automating manual tasks
Access to data is required for digital automation. Financial service providers have an opportunity to access data more easily when integrated systems are in place.
Due to its long-term cost-effectiveness, automation is a worthwhile investment since the world is becoming increasingly digitized. To stay competitive and to thrive in their growth prospects, SMBs must consider the benefits of open banking.
SMBs that accept credit and debit cards will reap huge benefits from moving to direct bank payments. Payment reversals, or chargebacks, are requests by customers to reverse card-based payments. Chargebacks are non-existent with open banking.
Convenient access to loans
Small businesses have easy access to loans through Open Banking. Open banking provides a good solution for SMBs since they usually need loans to improve their business processes and streamline their marketing.
Due to its simplicity, it enables them to quickly determine their eligibility for loans without manually submitting documents and financial statements. As a result, both business owners and lending institutions save time, effort, and resources.
SMBs can reduce their merchant service fees thanks to Open Banking since they don’t need as many POS terminals and card readers. A reduction in Fraud and a lack of fees from the acquirer, Mastercard, and Visa make this possible.
Additionally, Open Banking can accommodate large payments, and at a lower fee than card-based payments.
Improved customer experience
A better customer experience is provided by Open Banking. Payments initiated by mobile banking require biometrics (usually a thumbprint or Face ID) to secure and approve the transaction, as opposed to online banking that requires a card reader and your login details.
Mobile banking applications allow you to approve Open Banking payments easily. You can do this because your mobile banking application uses 2-factor authentication in combination with your device identifier and your face, thumbprint, or pin.
Open Banking is gaining traction. It has already evolved from consumer and SME accounts to corporate Treasurers, to Open Finance, which goes beyond current accounts in the UK.
With leading G20 economies publicizing their plans, open banking is only gaining traction worldwide. You can take advantage of these benefits today and in the future with the right partner – and the possibilities are limitless.