Although PSD2, the updated Payment Services Directive has been law since 2018, it’s still early days for Open Banking. PSD2 requires banks to give authorised third parties access to the financial information of a bank’s consenting customers.
The key issues your business will need to handle going forward involve software integration, and access to real-time information on transactions that involve multiple steps.
Businesses which adopt Open Banking will gain hugely from automated processing, real time reporting and improved liquidity from faster settlement times. But to do so requires a move towards Cloud-based accounting services that support Open Banking.
As a business grows, so too does the complexity of its accounts. Open Banking will be crucial for businesses who want to manage those accounts in the most efficient, secure, and cost- effective way. This is particularly true for businesses with multiple entities and multiple banking providers in different jurisdictions. Many companies founded in the last decade trade overseas, whether they’re selling or buying. This means that many modern companies have had to set up other companies in other jurisdictions with bank accounts in other currencies. Such companies are likely to be dealing with foreign exchange and bank reconciliation across multiple currencies.
The accounting needs of multi-entity business structures are significantly complex. Before Open Banking, accountants were left to work with disconnected systems, files, approvals, and time-consuming technologies built for processes that might be decades old. Working with a Payment Initiation Service Provider (PISP)*, the entire process can be seamlessly initiated from within the accounting system and settled straight away. This effectively means that finance staff can spend more time analysing the information and doing value-added work that will contribute to the growth of the business.
Businesses which adopt Open Banking will gain hugely from automated processing, real time reporting and improved liquidity from faster settlement times.” Darren Cran, COO, AccountsIQ
Read our new guide ‘Open Banking ushers in a new era for accounting‘ which explains what Open Banking means for businesses and the steps and processes involved.
Note: Payment Initiation Service Provider (PISP): companies authorised to initiate payments into or out of a user’s accounts.
