Open banking, bank APIs and data sharing flourished in 2018, with small business and corporate financial services squarely in the path of this financial services trend as banks and FinTechs consider new ways to enhance business payments, accounting, treasury and financial management.
The strength of open banking is apparent in the fact that it has gained traction even in markets like the U.S., where regulatory requirements for FIs to open up data are non-existent. Yet the trend isn’t without its complications. As seen in 2018, new questions emerged over small businesses’ trust in open banking, corporate awareness of what it means, and how financial institutions will continue to manage security of the data as it moves between systems.
With the financial services space continuing to work through these hurdles, Andrew McFarlane, managing director at Accenture’s Payments practice and head of Accenture‘s Open Banking group, told PYMNTS what he expected open banking initiatives to deliver to the small business banking ecosystem in 2019. While there are a few driving trends he predicts for the new year, they all have one thing in common, he said: customer service. Read what he had to say below.
“With the digitization of payments, small business customers of banks are demanding a strong customer experience. The top trends in the payments industry all have customer experience as the biggest driver for payments.
“Over the past 13 years, 3,000 new FinTechs have sprouted up in major financial services markets. Of these, 60 percent are licensed payments companies such as Stripe, Square, Klarna and Revolut. As a result of competition and demand in the market, instant, invisible and free payments will soon be a given. A stellar consumer experience will be key for small businesses to gain and retain customers.
“For now, banks have a monopoly on the data they need to deliver meaningful customer experiences, and they have built customer trust — in our recent Corporate and Small Business customer global survey on Open Banking, 68 percent of those surveyed would prefer their bank to provide them with an Open Banking ecosystem. This trust does flow through on the Retail customer side, with more than half of Millennials and Gen Z consumers willing to share online bank account credentials with third parties — as a result, this monopoly is vulnerable.
“This is the era of open banking, and we are seeing two distinct movements in countries around the globe. Firstly, regulators driving Open Banking or Open Data (e.g. PSD2 Europe), CMA [Competition and Markets Authority] reforms (U.K.), Fintech Law (Mexico) and Open Data (Australia) and mandating with relatively aggressive timelines. Alternately, we are seeing markets and banks move in advance of regulators (e.g. Singapore and the marketplaces created by DBS and UOB), bringing innovative new products and services to retail customers initially and now expanding into the small business and commercial customer space.
“With competition on the rise, bank and FinTech fusion, and value aggregation will become table-stakes. Payment providers will need to adopt the view of supply and demand — what is the consumer asking for, and what do they need?
“From a small business perspective, these companies typically do not have their own treasury departments as their larger counterparts do. Thus, it is valuable for them to have real-time access to their cashflow and liquidity positions — a capability that open banking can provide. The right open banking solutions can give [SMBs] an aggregated view of their accounts across multiple banks which translates into a real benefit in terms of better business understanding and cash-flow management. As such, [SMBs] want access to solutions that unify and simplify cumbersome business and administrative processes, such as accounting, bookkeeping, payments, taxation and cash management. Small businesses surveyed in our recent study cited payments (25 percent) and cash management (21 percent) as the areas of their business that could be most improved in partnership with their bank. And many are willing to pay a reasonable premium to get the benefits.
“The battle over customer experience has begun, and it is anyone’s to win.”
— Andrew McFarlane, managing director in Accenture’s Payments practice and head of Accenture’s Open Banking group