Open banking makes B2B payments significantly faster and cheaper than other e-banking solutions. Accounting applications with open banking connectivity will therefore become must-haves for businesses.
This is important news for software companies, as it presents a myriad of opportunities for offering relevant products. Here, we explain why open banking has these advantages over more established e-payment methods, and how Ponto comes into the mix for completing the process.
Introduced in the EU in 2018, open banking is a relatively new alternative to credit cards, wallet services (PayPal, etc.) and direct online transfer methods (Payconiq, iDEAL, etc.). Open banking differs from these by allowing licensed third parties, such as invoicing platforms, to initiate SEPA payments via (mandated) bank APIs.
With open banking, accounting and invoicing applications obtain authorization directly from banks. This means users can initiate payments directly from their own solutions, without having to copy data from one place to another. Leaving no risk of data becoming truncated or lost during the process. What’s more, payments go directly into recipients’ accounts, without involving any intermediaries. The result is a smooth, speedy and cost-efficient experience for payers, and optimal reconciliation for payees.
While credit cards and e-payment methods (such as Payconiq and iDEAL) connect with banks in a similar flow to open banking, these do not send payments directly to merchants’ accounts. Instead, payments go via a payment processor, who credits recipient accounts at the end of the day, week or sometimes even the month. The involvement of a third party therefore adds delays that impact liquidity, along with extra costs and the risk of data corruption. What’s more, the break in the accounting chain means merchants have to take the extra step of reconciling payments with invoices via their bank account entries.
Another important differentiator is that, while open banking has seamless pan-EU reach, many e-payment solutions are restricted to a single country.
Open banking therefore provides the most direct route for initiating, completing and administrating B2B payments, throughout the EU.
Connectivity Is Key
The multiple advantages open banking brings to business are clear. And this creates a large market for accounting applications. For software companies that want a slice of the action, one of the most important factors is how their solutions will connect with banks’ systems.
With every bank developing its own APIs, for which there is no single standard, maintaining cross-the-board connectivity is a gargantuan task. The good news for software companies is that this distraction can be avoided by partnering with a licensed open banking aggregator that’s able to facilitate the necessary connectivity.
Ponto is such a partner. We provide a single, simple-to-implement API that connects accounting software to every EU bank. And thanks to our focus on open banking for B2B, we offer an unrivalled level of support for software companies involved in invoicing, accounting and ERP.
Unlike other open banking aggregators, Ponto supports multiple connections for a single bank account, ensuring invoicing software, ERP and cash management can run simultaneously without any issues. We can also enable complex situations, such as having third parties acting on an account holder’s behalf, without having to undergo difficult bank mandate processes. This facility is provided through our Ponto for Representatives feature.
Controlling Costs and Streamlined Management
Open banking is cheaper than e-payments, wallets and credit cards due to elimination of intermediary costs. There is, however, still a charge for using aggregation services such as Ponto. This is typically based on a fixed, low fee per transaction. In addition to these options, Ponto uniquely offers an all-in subscription which covers unlimited payments.
Ponto’s service comes together via a free customer portal which allows easy management of bank connections, access controls and transaction search across banks and software partners.
Get in touch to find out more about how Ponto supports open banking software development and implementation.