Understanding Open Banking: A Guide for Businesses

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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 more than just a buzzword; it’s a transformative force shaping the future of the finance industry. In this user-friendly guide, we aim to demystify Open Banking, shedding light on how it can benefit your business and how to navigate its future implications.

The Evolution: PSD2 and CMA Reforms

Open Banking emerged in the wake of the Payment Service Directive (PSD2), prompting the Competition and Markets Authority (CMA) to call for a reformation in how banks handle financial information. The goal? Injecting innovation and competition into the banking sector, empowering customers to make informed decisions and fostering better financial products.


What Open Banking Entails

Open Banking, at its core, involves UK-regulated banks sharing crucial customer financial information. This includes insights into spending habits, regular payments, bank balances, credit card details, payment history, and savings.

Embracing Open Banking Transactions

To embrace Open Banking transactions, high street banks and building societies offer solutions found on the Open Banking Directory. Two types of authorisations come into play: Account Information Services, consolidating various accounts for budgeting, and Payment Information Services, enabling secure payment sharing without third-party intermediaries.

Open Banking’s Impact on Businesses

Since its inception in 2018, Open Banking has begun to unveil its potential impact on businesses. Beyond transparency, Open Banking allows for efficient fund management, facilitating informed decision-making in both personal and corporate banking.


Revolutionising Face-to-Face Transactions

While the UK has been somewhat cautious in adopting Open Banking for face-to-face transactions, technological advancements open doors for retail, hospitality, and staged payments. Open Banking’s integration as a point-of-sale payment option streamlines customer journeys, offering a more personalised and flexible experience.


Unveiling the Mechanics of Open Banking

In practical terms, Open Banking in payments mirrors a bank transfer, offering instant transactions that benefit both consumers and businesses.


B2B Dynamics: The Need for Speed


For B2B transactions, Open Banking’s instant transfers address the common desire for swift payments, aligning well with the trend of automated invoicing.

Benefits of Open Banking for Businesses

Complete Financial Overview: Open Banking provides customers with a consolidated view of their financial health, aiding informed decision-making.


Smarter Budgeting: Apps leverage account aggregation to recommend savings, contributing to long-term financial health.


Quick Customer Verification: Open Banking streamlines customer onboarding, allowing swift and secure verification without manual processes.


Instant Online Payments: Open Banking introduces a new payment method, ensuring quicker and more reliable transactions compared to traditional card payments.


Immediate Fund Availability: Particularly beneficial for investing or online betting, Open Banking ensures instant fund availability for timely reactions to opportunities.


Enhanced Security: Open Banking payments are designed with strong customer authentication, reducing fraud and improving payment security.


Customer Control: Open Banking ensures customers retain control over their data, determining who accesses their information and authorising payments.


Future Feature: Variable Recurring Payments (VRP): The upcoming VRP feature will enable easy money transfers between accounts, enhancing savings and budgeting capabilities.

Payment Gateways Facilitating Open Banking: A Seamless Financial Experience

In the realm of Open Banking, payment gateways play a pivotal role in ensuring a seamless and secure financial experience. These gateways act as the technological bridge, facilitating the swift and efficient transfer of funds between customers and businesses. Leveraging advanced authentication methods, such as face recognition and fingerprint technology, payment gateways enhance the security of Open Banking transactions. As businesses embrace the future of finance, these gateways become the linchpin, translating the potential of Open Banking into practical, user-friendly solutions. With the convergence of cutting-edge technology and financial innovation, payment gateways are at the forefront of enabling a new era in digital transactions.

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.


Frequently Asked Questions (FAQs)

Commonly Asked Questions
What is Open Banking, and how does it differ from traditional banking?
Open Banking involves UK-regulated banks sharing customer financial information to foster innovation and competition. It differs from traditional banking by allowing secure data sharing for improved financial services.
How can businesses integrate Open Banking into their operations?
Businesses can integrate Open Banking by exploring solutions on the Open Banking Directory, utilising Account Information Services for budgeting, and embracing Payment Information Services for secure payment sharing.
Are there security concerns associated with Open Banking transactions?
Open Banking transactions are designed with strong customer authentication, including face recognition and fingerprint technology, to enhance security and reduce fraud risks.
What benefits does Open Banking offer for budgeting and financial management?
Open Banking provides a complete financial overview, enabling smarter budgeting through account aggregation, recommendations for savings, and real-time insights.
How does Open Banking impact face-to-face transactions, especially in retail and hospitality?
Open Banking is gradually influencing face-to-face transactions by offering a point-of-sale payment option, streamlining customer journeys in retail and hospitality.
Can Open Banking completely replace traditional card payments in the future?
While Open Banking is emerging as a powerful alternative, traditional card payments are likely to coexist. Open Banking, with its instant transfers, offers advantages for certain transactions.
What role do payment gateways play in facilitating Open Banking transactions?
Payment gateways act as technological bridges, facilitating secure and efficient fund transfers between customers and businesses in Open Banking transactions.
How can businesses ensure compliance with Open Banking regulations?
Businesses can ensure compliance with Open Banking regulations by staying informed about industry standards, partnering with ethical Open Banking firms, and implementing secure authentication measures.

Merchant Advice Service and Open Banking

Open Banking is a groundbreaking change in the finance world, offering numerous advantages for businesses. By using these APIs, companies gain access to a wealth of financial data from bank accounts, which can be used to improve products and services. This data includes transaction data from savings accounts, credit card details, and other banking information.


Open Banking’s secure application programming interfaces (APIs) allow businesses to offer more tailored financial products and services. The Open Banking Directory is a critical resource, providing tools for efficient account information management and secure payment methods through open banking payments.


Businesses can benefit greatly from Open Banking. It simplifies accounting data handling, enhances online banking experiences, and improves financial management through account aggregation. Additionally, the upcoming Variable Recurring Payments (VRP) feature will further revolutionise how banks and apps work, offering even more flexibility and control in financial transactions.

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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