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Gaining the Advantage of Open Banking for B2B Transactions

October 27, 2022


Gauging the openness of open banking

The application of open banking technologies in the commercial sector has such a broad scope that it has the potential to alter how business is conducted fundamentally today. The fundamental tenets of open banking tend to promote autonomy while pushing away from manual dependence and control.

One of the most significant insights to emerge from the financial sector in recent years is the concept of open banking. The practice of open banking means that consumers can securely share their data with third-party providers (TPPs). This makes it easier for various service providers to access consumer data, which can be used for analytics, marketing, and other purposes.

However, B2B transactions for decades now have been slow and painful because companies have relied on laborious manual processes. But this trend has finally been questioned, and for the best. The multifarious processes involved in a B2B transaction make it especially suitable for adopting open banking. These processes can be transformed into an automated pipeline to streamline the to-and-fro mechanics for real-time payments rails.

Faster Data Collection & Analytics

Data is gathered in a variety of ways. Customer, vendor, and employee data is at our disposal. Product offers and pricing information is available. Even performance metrics for our goods or services are available, which must be considered to remain competitive in the market. Obtaining this information from a single source is no longer sufficient; you now require it quickly from various sources.

That’s because “data” has become the new oil and is required everywhere now. Everyone wants more of it, even your rivals desire your data. Thankfully, open banking does not mean free access to data for everyone. It simply means authorized access to source data by avoiding duplication. This allows for quicker data collection, saving time and improving the credit cycle. Another benefit of open banking is the depth of data available. With data points from various sources, the high quality of data leads to better analytics. This, in turn, helps businesses offer better services to customers. The open banking market is forecasted to reach $43.15 billion by 2026, considering its steady growth at a CAGR of 24.4% since 2019, as per Allied Market Research.

Improved Predictability & Transparency

The second advantage of open banking is enhanced predictability through transparency. This can be achieved through the following:

  • Better management of customer expectations, as well as reduced costs associated with incorrect predictions about a customer’s future actions
  • Support more thoughtful decisions about products and services based on insights into purchasing patterns and preferences
  • The failure rate of transactions is limited through an open banking framework as bank accounts do not expire as soon as credit cards do and don’t attract high merchant fees

At the end of the day, the abundance of data is of no good if it’s not put to adept use. So, the solutions created by open banking platforms and partners are only as good as the problem they intend to solve. This problem statement needs to be identified only through the lens of consumer behavior. Consumer personas can be created with data transparency to ensure that the services are targeted as per their needs. Generalizing the demand when the target is a specific niche, would be naïve.

Integrating Payment Instructions

Payment instructions are the key to success for your business, and integrating them is about to get a lot easier. Automating payments can save you time, effort, and money. This is the part where the benefits of cloud infrastructure can be best utilized. The need for manual intervention is surpassed when every action happens in the cloud based on a precondition—and so is the possibility of delays and errors. The processes become efficient, which translates into hard cash for the company.

Payment integrations are not complicated, given the instructions are clear and precise. The APIs in the AA framework help fetch data from different platforms and databases without the need to request access to it every time. It is a stepping stone to its utilization and a piece of the puzzle in creating smart contracts. The end goal is to bypass intermediaries for the performance of a function, thereby making the process lightning-fast and safe.

The power of payment orchestration is demonstrated by stacking the payment technology together to improve each aspect of the customer journey.

Increasing Security Through APIs

With less manual intervention, a larger workforce is more actively engaged in monitoring the transactions. Vigilance is crucial to the financial ecosystem due to the escalated threat of fraud in the digital landscape. The heart of open banking lies in the vital authentication requirement rather than screen scraping every time a transaction is initiated. Security features are embedded in APIs to fulfill the philosophy of open banking.

  • Payment APIs can be used to help with auditing, reporting, and compliance.
  • The APIs can also be used to prevent fraud, money laundering, and identity theft with the help of behavioral profiling.
  • In addition, the data APIs can help increase security for B2B transactions by helping you keep up-to-date on any changes within your business.
  • Guidelines need to be framed, to ensure API standardization across its applications in a bid to reduce the transaction fees to under 1%  levels (which is significantly lower than those of credit cards). Flagging transactions that deviate from those guidelines is an essential KPI in the open banking system.

Embark Upon the Fintech Revolution

With the introduction of open banking, a new era of B2B transactions has begun. This innovation has many benefits and can go a long way toward solving the exact issues that have plagued business-to-business transactions for so long. Through open banking, businesses can finally authentically connect with their customers, building trust at every level of interaction through transparency and security. In short, open banking has completely changed the game.

We’re just a call away if you think that now is the time to reap the benefits of open banking in your B2B payments processes.

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