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February 17 2023

Open banking is the answer in changing times – Gilroy

Blog Details

With card-transaction and cash-handling fees continuing to rise, it might be time to consider new payment options

“I am being totally stiffed by my bank. And so are all my retailer colleagues,” says Billy my wholesaler friend. He’s ranting again but with good cause.

One of the reasons that cash and carry has been so successful over the years is its ability to generate cash. Until recently the vast majority of customer payments were in cash at the time of purchase. Fantastic for cash flow and a vital companion for low margins.

But times are changing.

There are now more card payments, more delivered orders, more account customers, more lengthened payment terms and more debt in the system. Allied to this are increased bank charges for clearing cash, and increased charges for handling card payments and direct debits – the result is a further squeeze on wholesalers' profits.

Billy and I have been working on practical ways to improve his earnings and reduce his costs: taking out non-profitable delivery customers, streamlining vehicle route plans, charging for click & collect orders, controlling the number of promotions and transitioning from marketing brochures to WhatsApp Business API.

We've decided to launch open banking, which offers two principal advantages over current processes. It is much cheaper when compared to the cost associated with processing card payments and funds are received more quickly with monies arriving in the wholesaler’s account in seconds rather than two-to-four days later.  

Open banking also offers an enhanced audit trail with payments linked to invoices facilitating accounts reconciliation and further enhanced by email payment confirmations.

There are a number of ways open banking adds real value for the wholesaler.

eCommerce payments

Open banking in the digital world is straightforward and offers full visibility of invoices paid and those outstanding. It's quick and frictionless.

Clear, simple invoicing

Customers can scan the QR code on the invoices. This triggers the banking app on their device which displays the invoice details and their personal payment page. All they have to do is press send to pay.

Progress-chasing payment

Open banking requests for payment are incorporated to automated digital notifications and sent to customers based on the agreed payment terms of the invoice. The credit control module gives customers access to their account information and provides a straightforward solution to settle their account. It offers everything from invoices and statements through to credits and the sales ledger. This is a massive benefit for wholesalers managing the debt ledger and takes the pressure off credit control resource.

 As you would expect, Billy started off very sceptical about open banking – he doesn’t "do technical". Now he has become an advocate – almost a zealot.

Anything that improves profitability and efficiency is good with Billy. And as Bill Gates once said, “the world needs banking but it doesn't need banks".