EU FinTechs Unlock Small Business Growth Using Open Banking

Open banking can help small and medium-sized businesses (SMBs) in more ways than one.

In fact, from payment gateways to automatic invoicing software, a variety of Europe-based startups are using the technology to better cater to the needs of the SMB market.

Payments Automation

Managing and tracking payments can be one of the biggest challenges smaller businesses face, especially when holdups create significant cash flow challenges for the receiving business.

Yet, according to a recent PYMNTs report, most SMB buyers pay more slowly than their suppliers want.

These days, however, open banking is making it easier for businesses to get paid instantly.

Payment links have emerged as one of open banking’s most useful products for SMBs because they’re as easy to set up as they are to pay. Businesses just need to send a link or QR code with their invoices and their clients can instantly make payment without the need to enter any details.

And while some of the biggest players in payments have introduced their own open banking payment link offerings, such as Mastercard’s Pay by Link, a growing number of SMB-focused FinTechs also offer the technology to their customers.

For example, German startup Denario has integrated open banking-powered payment links into its platform for SMBs to help automate accounts payable and reduce friction in business-to-business (B2B) transactions.

As company Co-founder Philipp Adrian Pohlmann told PYMNTS in an interview, Denario’s vision is to replicate the speed and convenience of consumer payments in the business world by helping SMBs automate all the extra steps involved, “from receiving, paying, processing, reconciling, and reporting the payment to reclaiming some of the VAT [value added tax].”

He added: “The full cycle for a [business] transaction is just much longer than when you pay for a product as a consumer.”

Accounting Software

Beyond payments, open banking can empower SMBs to automate a number of accounting processes and remove the need for time-consuming manual bookkeeping.

Whereas legacy accounting platforms rely on outdated manual ways of importing data, modern software can access customers’ financial data in real time directly from their business bank accounts using open banking.

One of the advantages of open banking for accounting processes is that it makes it possible to collect information from multiple accounts, even if they are held with different banks. Several accounting software platforms that are popular with SMBs, including QuickBooks and Sage Accounting, have integrated open banking in this way.

What’s more, some open banking platforms go beyond just gathering account data. In fact, account information service providers increasingly market their platforms in terms of their ability to provide users with meaningful data.

For example, instead of just serving up data as if it was spat out by a bank API, the likes of Nordigen promise to “[clean] and [categorize] the data in such a seamless way that it makes your life easier.”

Likewise, Tink, which powers open banking data collection for SMB accounting platform AccountsIQ, says it can help businesses access real-time financial data which is “already cleaned and standardized so it’s immediately useful.”

Ultimately, both payment platforms and accounting tools leverage open banking to streamline otherwise lengthy manual processes and create greater visibility over payments. And for SMBs, that extra time and visibility could make all the difference for a company’s finances.

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