UK businesses able to measure effectiveness of Open Banking

Open Banking could save businesses time and money, while streamlining your operations – on average it can save 150 hours of operational time each year.

Measurable effectiveness of Open Banking

That’s according to new Payit research, which reveals that many businesses could benefit from Open Banking in a fast-paced financial landscape.

Now in its sixth year, Open Banking allows businesses and customers to share their bank account data with secure third parties. These services are fuelling faster payments, quicker borrowing applications, and simpler invoicing.

Payit surveyed 150 chief executives, chief financial officers and decision-makers from UK businesses with annual revenues of £2 million or more, to find out their pain points with operational finances and how Open Banking helps.

The findings reveal plenty of Open Banking advantages – from lower processing fees to less time chasing late payments. On the other hand, concerns around security mean some organisations may not be seeing the benefits just yet.

Open Banking starts to make a breakthrough

In such a digitally savvy country, it’s perhaps no surprise that most business leaders are already familiar with the benefits of Open Banking. Two thirds (66%) say they’re very familiar with this tech, while 31% have some familiarity.

At the other end of the scale, 4% have little to no awareness. So, there’s still some room for improvement for businesses to learn how the technology can help them.

Businesses with higher revenues tend to be more familiar; while 57% of those in the £2-10 million range are aware, this jumps to 75% with revenues of above £500 million.

Boosting the choice of customer payments

Many businesses have already spotted the advantages of Open Banking for their operations and customers, with 68% using the technology.

They’ve added it to a wide mix of payment options, with credit cards (90%), bank transfers (82%), and debit cards (76%) also popular.

Three in five (60%) use cash payments, while 72% use invoices. From Open Banking payments to banknotes, it all adds up to offering a wide and flexible choice for customers.

Open Banking users trim payment costs

Saving on payment processes like debit and credit card processing fees is just one area where Open Banking could offer major benefits to businesses.

While many companies choose to offer a varied and flexible mix of payment methods to meet different customer needs, Open Banking holds the potential to deliver significant savings.

Overall, more than one in five (23%) organisations spend £20,000 to £50,000 on payment processes each year, whereas 15% spend between £10,001 and £20,000. More than a tenth (13%) pay over £50,000 annually.

But Open Banking users could make some helpful savings here. Their spending on payment processes (£18,965) is 8% lower than the wider average (£20,652).

The same goes for processing fees. Overall, 25% of firms spend between £7,000 and £10,000 on these fees annually, 21% spend between £5,000 and £7,000, and 17% spend up to £5,000. For 9%, the bill for these fees comes to more than £50,000 each year.

Open Banking users typically spend £14,672 on processing fees, compared to the wider average of £15,789.

Non-users miss out on time savings

Smoother and more efficient operations could also be among the advantages.

When added up over a month, Open Banking users spend 44 hours and 36 minutes on operational tasks, compared to 57 hours and 9 minutes for those yet to take the plunge. This monthly difference of 12 hours and 33 minutes isn’t to be sniffed at. Over a year, the saving comes to a huge 150 hours and 36 minutes, which is just over four working weeks.

Open Banking users spend less time processing invoices each month compared to non-users (12 hours and 22 minutes, versus 16 hours and 43 minutes).

They also spend less time on recurring payments (10 hours and 11 minutes, against 13 hours and 10 minutes); ensuring data is processed and secured correctly (11 hours and 9 minutes, versus 14 hours and 40 minutes); and chasing late payments (10 hours and 54 minutes, compared to 12 hours and 36 minutes).

Security named top priority for payment solutions

When ranking ideal payment solutions, businesses are mainly after efficiency, security and financial insights. .

Security (35%) is their top priority, followed by payment and invoice automation (19%), and financial savings or growth (18%). Accessibility (15%) is also a big deal, along with speed and affordability.

Open Banking offers lots of payment innovations, while also keeping security at its heart and rigorously in check.

The likes of payment links and QR codes give customers a hi-tech alternative to cards and cash, and could lead to more cost-effective and convenient transactions.

They could remove the need for customers to manually enter their bank account details, making everything more secure.

And it’s all backed up by tight regulation as open banking’s security profile is based on Finance Grade API specifications, similar to that of traditional banking security, and is regulated by the FCA or National Competent Authority.