SMEs operating in competitive markets are always on the lookout for ways to improve, whether it’s offering their customers a better experience or making their own day-to-day operations smoother.

Taking advantage of marginal gains is what will take them to that vital next stage of growth. Therefore platforms that support SMEs, such as business management services, payment providers, accountancy software and more, will want to support them in this goal as much as possible.

This is where open banking comes in. Open banking enables platforms and providers to service SMEs more effectively, using Account Information Services to understand their finances better and offer more tailored products, while offering Payment Initiation Services to bolster checkout experiences and facilitating instant settlements.

Businesses will benefit from open banking in different ways, but making it available to SMEs gives platforms the best chance of supporting their growth - strengthening customer loyalty and standing out from competitors.

Bigger and better: how open banking bolsters a business’s offering

Research suggests that consumers increasingly want to pay in a variety of ways, with as many as 69% of UK consumers abandoning their checkout experience if their preferred payment method isn’t available.

As of 2023, mobile e-commerce payments make up 60% of all ecommerce sales around the world. Enabling these end customers to sidestep fetching their card details to complete a transaction, instead simply authorising a bank transfer via their online banking app - without ever having to leave the business’s site - is unquestionably a superior experience. Over the coming years, SMEs will be increasingly expectant of alternative payment methods like open banking from their payment providers, as they can get more incomplete purchases over the line and boost growth.

Looking further forward, commercial Variable Recurring Payments (cVRPs) have the ability to transform commercial subscription models with a payment method that is both safer than Direct Debit and more flexible. While not yet currently available, its impending introduction will empower SMEs to introduce a reliable recurring payment stream that works for them and their customers. For business payment and banking providers, looking at this now gives them the chance to get ahead of what will certainly be an important trend in eCommerce.

Eased cash flow through faster settlement speeds

40% of UK SMEs don’t make the five year mark, and the predominant issue these businesses face is cash flow. SMEs need to make payments such as staff costs, supplier payments and rent at given times in the month, yet slow settlement speeds and late invoices can leave them in precarious positions. They’re also often juggling multiple accounts, making it hard for internal teams to move funds effectively.

Using open banking, SMEs can encourage quicker payment times with a payment method embedded into their service, while also benefiting from access to real-time payment rails. Instead of waiting three to five days for funds to hit their account, it appears instantly thanks to open banking using Faster Payments in the UK and SEPA Instant across Europe.

In terms of funds management, banking providers can offer SMEs Account Information Services (AIS) to categorise this information and streamline their operations. The running of their business therefore becomes generally slicker and they have more time to concentrate on growth areas.

What’s more, business service providers using AIS may even choose to offer SMEs access to credit to ease cash flow challenges, as they have all the business data they need for accurate lending. This enables them to assist with the single biggest issue their customers face, all within the same product they were already using.

Lower payment costs empowering further business spend

Payments made via open banking are not only quicker, but cheaper. As they’re not associated with cards they’re not subject to the usual scheme fees that come with card payments.

While open banking payments are not completely charge free, they are more cost effective, and though ‘pay-by-bank’ has not yet reached mainstream adoption, part of this is due to businesses not being aware that these methods exist. For platforms and providers that support SMEs, offering them a way to reduce the cost on every sale they make is a solid increase in the value they’re bringing their customers…

As pay-by-bank becomes more commonplace, SMEs can put these savings into growth areas of the business, such as new staff, supplies or software.

Many SMEs have begun using open banking to their advantage already, but we’re very much at the beginning of adoption. It’s the businesses that support SMEs that have the power to take this adoption further, giving them reliable and varied opportunities for growth, and therefore providing an all-round more valuable service.

By offering open banking, these platforms and providers can benefit from a customer base that is robust, successful and ultimately, extremely loyal.