How open banking can boost your business

  • 20 Jul 2021

There are a number of benefits to small businesses using open banking

By Robin Morris, CEO, Paydog

Despite more than three million transactions being made through it, many small business owners have not heard of open banking. Why is this? Well, it’s mostly because banks don’t want you to know about the benefits! This guide aims to explain what open banking is, and how it could benefit your small business.

Open Banking is a secure way to give third party providers (TPPs) access to your financial information. It was created to protect customers and spur innovation in banking and financial services. There are a number of benefits to small businesses from using open banking.


Accounting imports

If you use Xero or other similar accounting packages, you may already be using open banking in your small business.

Open banking is what powers and secures these financial management tools access to your banking transactions.

Apart from accounting, there are a number of innovative financial management tools being developed.

Payment matching

As well as providing account information services, authorised payments institutions can initiate payments from your customers (with their approval) to your account. The payments are made directly by bank transfer from your customer’s account straight to your account.

These payments can be initiated with a reference chosen by you, on the date you chose, with the amount you choose.

This vastly improves your matching and reconciliation process, reducing time and effort on your bookkeeping.

In the UK, these bank payments usually clear in around 10 seconds so can be suitable for POS style checkouts.

No chargebacks

If you are a business taking credit and debit cards, there are some huge improvements available for your business in moving away from card payments to direct bank payments.

Chargebacks are payment reversals triggered by customers who wish to reverse a card-based payment. Sometimes known as Section 75, these can leave the merchant spending hours arguing and proving they deserve the customer’s original payment. With bank payments there are no chargebacks.


Reduced costs

As well as savings on costs incurred from fraud and chargebacks, small businesses can save by reducing their merchant services fees, as there is no need for card readers and POS terminals.

Savings can also be made on individual payment fees too. With open banking, there are often reduced merchant fees due to the reduced fraud and absence of acquirer, MasterCard and Visa fees.

Open banking can support very large payments too, often at reduced fees when compared to card-based payments.

Improved customer experience

Since its launch in 2018, the vast majority of banks now offer a very slick mobile banking approval process.

While online banking payments often need a card reader and your personal login details, mobile banking-initiated payments use biometrics, including face ID and thumb prints to secure and simply approve access and payments.

Unlike PayPal, which has just had to introduce SMS text messages to approve card payments, open banking payments can be approved using your mobile banking app. This is because your mobile banking app has built in two-factor authentication using device identifiers and face ID, thumbprint or pin.


In summary, open banking makes for a slick, efficient payment experience that can save you time and money accounting for your payments, leaving you more time to spend with your customers.

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