While 2022 was a challenging year – marked by the ongoing pandemic, rising inflation, energy shortages, and the fallout from conflict in Europe – we also saw businesses adapt and find success.
With a potential economic downturn looming, these obstacles have only heightened the determination of businesses looking for ways to scale and maintain their competitiveness. And many have now chosen to use fintech to expand into new markets and satisfy today’s customer expectations.
Here is where open banking enters the equation – particularly for businesses looking to move into Europe.
Open banking is a system that enables the sharing of financial data and services through Application Programming Interfaces (APIs). It allows customers to securely share their financial data with banks, fintechs, other financial institutions and third parties – helping them take advantage of a wide range of personally tailored financial products and services.
A key benefit is that it makes it easier and more convenient for customers to access financial services. For example, rather than having to manually enter financial information on multiple websites or applications, customers can use open banking to securely share their data with multiple providers, saving time and effort.
Open banking also helps increase competition by allowing new players to easily enter the previously gatekept market and offer innovative products and services to customers. As a result, customers will experience lower prices and an overall improvement in the quality of financial services.
A unified approach
In the European Union (EU), open banking is regulated by the revised Payment Services Directive (PSD2) – which aims to increase innovation in the payment services sector and improve the security of online transactions.
One of PSD2’s main provisions is the requirement for banks to provide APIs that allow third parties, such as fintechs, to access financial data and services on behalf of their customers who have given explicit consent for their data to be shared. This regulatory framework has created a whole new industry of fintechs across Europe that have developed tools to accelerate payment processes, increase security for merchants and consumers, and improve the customer experience. Now, a single integration can link to over 2,000 banks and process payments in less than 15 seconds.
Open banking offers many benefits to businesses looking to grow their payment options. These include less manual data entry, resulting in improved conversion; generally higher transaction success rates and lower fees than credit or debit cards; and a reduction in fraud and chargebacks. Open banking is an excellent option for businesses that want fast and agile payment processing, as it gives customers better protection and increases operational efficiencies by covering the EU and UK with a unified approach.
Furthermore, while Visa and Mastercard remain powerhouses of the industry, payment method preferences between regions vary across the continent. As such, enterprises looking to expand into new territories must ensure their checkouts cater to a variety of payment options. Here, the regulatory framework that legalises open banking allows businesses to deploy one payment solution that can integrate with multiple payment methods to provide flexibility. This is further bolstered by significantly reduced fraud, improved transaction success rates, and simplified setups that can be achieved in a matter of days rather than months.
Despite factors such as inflation and global disruptions causing economic uncertainty, the ecommerce industry continues to boom, giving businesses the opportunity to scale and pursue growth in new markets.
Tackling common payout issues
No business can survive just by taking money, sometimes you have to pay out too. While businesses rely on checkouts as a scaling metric, business-to-business transactions, such as those to legal or private entities, are also key. Arming your business with the right payout solution is imperative in the journey towards optimising operational efficiencies, particularly when payments need to be made on a large scale or sent internationally. By implementing the right payout solution, businesses can streamline their processes and save time and resources.
The biggest payout obstacle is transaction costs, particularly for enterprises operating internationally. Currency conversion fees are charged on every cross-border transaction, and can soon add up, which is especially challenging for smaller businesses. There are also logistical issues to overcome, not to mention human error, both of which are inevitable when large numbers of manual payouts are processed on a frequent basis. Issues, such as funds being sent to the wrong recipient or delays due to administrative errors, are often exacerbated by fixed banking hours and complex processing procedures, which can damage a business’s reputation and erode stakeholder trust.
Fortunately, there are solutions that can, if not completely remove, then at least reduce, the frictions businesses face from payouts. This means simplifying mass transactions, regardless of location; accepting any payment method; and opening up receipt of funds to all currencies.
Key factors when selecting a payout option
When searching for a payout solution, businesses should consider whether a single dashboard or API-enabled functionality is the preferred choice for managing the process. Here, implementing solutions that streamline the sequence of handling multiple payment orders and receipts across recipients, regardless of location or preferred payment method, and the capability to check their status from the same unified interface is vital. And with more businesses looking to enter emerging markets in other parts of the world, ensuring the solution allows recipients to receive their funds in their native currency is becoming increasingly important.
Growth in a time of uncertainty
Despite factors such as inflation and global disruptions causing economic uncertainty, the ecommerce industry continues to boom, giving businesses the opportunity to scale and pursue growth in new markets. Businesses that diversify their payment options through considered adoption of the appropriate technologies and payment providers will be best positioned to navigate the rapidly changing digital landscape – fulfilling customer needs and staying ahead of the competition.