Cashfac and the Open Banking Phenomenon

James McGivern, Head of NBFI at Cashfac reflects on the impact of Open Banking has on Cashfac’s products.

I realised last week that it has been a full year since I joined Cashfac and it occurred to me how much I have learned in that year. I have worked in or around the payments and banking space for the last twenty-something years, but this current period is the most exciting time I can remember in the industry. We are on the cusp of a revolution in this space and the revolution is called Open Banking.

I say we are on the cusp but, judging by the Open Banking Expo in London last month, it might be more accurate to say the revolution is underway. But I wonder how many industries have really woken up to the implications of Open Banking for them.

The banking sector is now just about mobilised, but it is behind where it should be, while the response in asset management and other financial services sectors has been at best patchy.

There are however exceptions to this gloomy prognosis. I was very impressed by A J Bell’s MD Kevin Doran’s panel discussion at the recent Platforum conference in London. Kevin’s arguments focused on the need for efficiency, like those that can be achieved using Open Banking solutions, to maintain margins because, in a very competitive market, current already-reduced fee levels will be difficult to maintain. Of course, for a panel discussion to work someone needed to disagree with Kevin, the depressing thing was that there were people who did.

The Impact of Open Banking

When people ask if Cashfac is an Open Banking solution, I always respond that Cashfac was Open Banking before Open Banking was a thing. What then has changed? I think it comes down to the fact that Cashfac is now not alone. Now instead of having thirty banks willing to connect to us, we can have four thousand. Further, we can add a thousand banks in the time it previously took to add one. This kind of quantum leaps forward in the industry quickly lead to tipping points where Open Banking functionality is ubiquitous and makes its effects irresistible.

What then can Open Banking do for the average company? Looking at the propositions that are coming out of it, I am now seriously wondering will it be possible to have reconciliation-free cash operations? There are probably a few wise old cynics out there laughing at the very idea of this, and, a year ago, I would have been one of them, but now I am not so sure.

Open Banking is going to most positively impact receivables management. It is going to allow the payee much more control over the cash they receive, even if that cash is “pushed” to them. It is going to allow payees to get that cash more quickly and, crucially, it may no longer be possible for the payer to chargeback or dishonour that payment. Individually these changes are powerful but taken together they represent the missing link in cash control. Okay, so you will still do the reconciliation tick back of the cash transactions, but once that is done, you should find that the balances straight-agree because the Open Banking-powered primary controls did not allow a break to occur.

Over the last year as I have explained the Open Banking options now available to asset managers, property managers, invoice discounters, insurers and other financial services clients; the standard reaction seems to have been one of shell shocked bewilderment followed by panic that they may have missed the boat. They haven’t. There is still time, but it is short. A failure to avail of these opportunities will leave your organisation at a significant disadvantage to its competitors, particularly new entrants to the market, and with weaker cash control, higher staff costs, poorer customer service, poorer risk management and a narrower product offering.