What is Open Banking?

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Libby James
Merchant Services Expert

Libby James is co-founder, director and an expert in all things merchant services. Libby is the go-to specialist for business with more complex requirements or businesses that are struggling to find a provider that will accept them. Libby is regularly cited in trade, national and international media.

What is Open Banking?

Open Banking is the go-to buzz word in the finance world right now, with many referring to it as ‘the future of banking.’ Our guide has been created to help understand Open Banking, how it can help your business and prepare for the future implications it may have on your company.


Following the PSD2 (Payment Service Directive) the Competition and Markets Authority (CMA) called for a reform in how banks handle financial information. The reason behind this was to inject innovation and competition into banking sectors, meaning customers can make informed decisions when it comes to their money, resulting in better products and allowing customers the ability to manage money more efficiently.


Opening Banking means that all UK regulated banks share customer financial information such as;


  • Spending habits
  • Regular payments
  • Bank balance
  • Credit card balance and payment history
  • Savings


In payment terms Opening Banking allows the customer and business to securely share data, including payment information, which means it can be used as a new and alternative payment method.

How to accept Open Bank transactions

The majority of high street banks and building societies provide Open Banking payment solutions, these can be found on the Open Banking Directory. There are two types of authorisation associated with Open Banking;


Account Information Services allowing the customer to see their various different banking accounts and credit arrangements in one place, helping them to budget. An example of this is combining all accounts together in a budgeting app or adding accounts to your existing banking app. In simple terms, it’s an information sharing facility making it easier to manage your finances.


Payment Information Services allowing customers to pay companies directly, unlike card transactions this doesn’t require the use of a third party such as Visa and Mastercard. This is applicable for both face-to-face transactions and online ecommerce payments. Open Banking authorises payments using face recognition, making it a secure way for customers to make payments and reduces risk of fraud.


What does Open Banking mean for businesses?

Since the start of Open Banking in 2018, we have only scratched the service of its ability and how this translates to business. Opening Banking offer transparency to both businesses and customers, allowing everyone to manage funds efficiently meaning we can make informed decision together in company and personal banking.


Unlike other areas of Europe, the UK is slower in the uptake of Open Banking when making face to face transactions. Technological advances mean that Open Banking can be used in retail, hospitality and for staged payments in replacement of a credit agreement.  Open Banking can be a payment option at point of sale, streamlining the customer journey and allowing retailers to offer a more personal and flexible solutions.

How does Open Banking work?

Open Banking in payment terms is essentially a bank transfer, we use them all the time when managing personal finance, this is simply the next step between businesses and their customers. The transaction is one that takes place instantly – which has benefits for both the consumer and business.

B2B Open Banking

When it comes to B2B, everyone wants their money yesterday! Plus, I know first-hand invoicing can be a real pain in the you know what! Automated invoicing is a trend we’ve seen grow in recent years and I feel Open Banking fits quite nicely into that. Enabling other businesses to transfer to your business bank account with ease is a win-win. To find out more, speak to our experts today.


Benefits of Open Banking for Businesses

When accepting card payments, there is a delay between the payment being authorised at point of sale or e-commerce and the business subsequently receiving funds to their account. Depending on the risk of your business this can be anything between five working days and faster next day settlements, which can often cause cashflow issues for industries such as motor trade businesses or travel firms who rely on receiving settled funds quickly. Speed of having those funds in your business bank account is a huge selling point for Commercial Open Banking. Open Banking has also illuminated problems commonly experienced within card payments such as chargebacks and PCI Compliance issues.


Open Banking promotions and offers

Sharing customer data and establishing spending habits allows businesses using Open Banking to tailor offers and promotions to specific customer requirements. For example, spending is ordinarily higher in the first week of the month, after payday. To entice customers to maintain these habits within your outlet you might choose to send offers directly to them.


Open Banking costs vs card payments

First of all, it’s important to remember that Open Banking can only be used for cleared funds – meaning we can only make comparisons based of debit card transactions. At Merchant Advice Service we always suggest assessments are made on a pound for pound basis. Having said that, there is no doubt that for some companies accepting Open Banking could make undoubtable savings – we’ll look at that in more depth later next.

Open Banking and staged payments

Open Banking enables data to be shared in a way which allows suppliers to set up customer staged payments. This fills a gap when it comes to credit card payments and can be a cheaper way to accept transactions compared to the likes of PayPal credit, Klarna etc. Payments are normally set up in a three-stage process, allowing longer for your customer to pay for more costly items. Each stage of the payment will be charged at either a fixed pence per transaction or percentage – depending on your supplier.

Open Banking and staged payments

Open Banking enables data to be shared in a way which allows suppliers to set up customer staged payments. This fills a gap when it comes to credit card payments and can be a cheaper way to accept transactions compared to the likes of PayPal credit, Klarna etc. Payments are normally set up in a three-stage process, allowing longer for your customer to pay for more costly items. Each stage of the payment will be charged at either a fixed pence per transaction or percentage – depending on your supplier.

Will Open Banking replace Card Payments?

When it comes to merchant accounts and card payments, let’s face it – Visa and MasterCard aren’t going anywhere!! However, it’s important for businesses to be aware of Open Banking, it’s benefits and how payments tech is changing. There are lots of arguments for adding Open Banking to your payments set up, with 20% of ecommerce check out during 2020 taking place using Open Banking.


Merchant Advice Service and Open Banking

Merchant Advice Service have chosen to partner with a number of Open Banking firms that share our ethics and no-nonsense approach when it comes to service and pricing. To find out more and how Open Banking can work for you speak to our experts today.

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Libby James

Libby James Co-founded Merchant Advice Service alongside David Bird in 2016. Her finance background, coupled with retail and customer service experience, gave Libby the drive to bring transparency and non-biased advice to the world of merchant services. Having come from the heavily regulated mortgage and insurance industry, Libby found it puzzling that other financial sectors lacked regulation and transparency leaving customers confused and unable to make informed decisions when it came to accepting card payments. This was soon to become Libby’s obsession!

With the help of some of the industry’s best, Libby began to research acquiring banks, complex terminology/regulation, and the problems customers experience within merchant services and payment gateway markets. She spent years on sourcing solutions for complex clients, which previously others were unable to assist with. Libby established relationships with brokers and banks which would soon form the cornerstone of Merchant Advice Service. As a result Libby has been featured in high-profile publications across the web.

Libby is proud to be the entrepreneur’s champion, supporting start-up businesses regularly. Her industry insights can often be found on LinkedIn where she provides free of charge advice and money saving pointers. It’s safe to say she has her finger on the pulse of everything card payments related.

Libby speaks of her experience in founding and running Merchant Advice Service…

‘Merchant Advice Service is one of my greatest achievements to date. We help business owners to overcome card processing issues which can become detrimental to their business. We assist SME’s in finding suitable card payments solutions, helping them create their vision. Each and every day is different, exciting and fore filling. As technology advances I can’t wait to see the way in which the merchant services market advances, and I’m pleased that our business will play a part in educating company owners along the way.’

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