The Open Banking revolution is happening right now. When it comes to online payments, initiating transactions via banking APIs is undoubtedly a gamechanger for the whole ecosystem. However, for some digital natives joining the game is not as easy as for traditional, well-established businesses. Access to tech-savvy corporate banking is limited. Fortunately, challenger banks come to the rescue. Are you running an online business? Here is what you need to know.

The rapid development of new payment methods based on open banking APIs is currently equally promising as challenging for online merchants, especially for companies operating in the digital realm, startups with no entrepreneurial track record, or brands offering their merchandise in innovative or just rare business models.

Open banking is a brilliant concept, especially in payments. Nonetheless, open-banking payments require future-minded banks on both ends of every wire transfer initiated via an API. While retail banks have been for years competing for consumers by continually introducing new digital solutions that make user experience even smoother and more convenient, for many merchants, access to modern commercial banking remains limited. Fortunately, some of the so-called challenger banks perceive the situation as a business opportunity and team up with companies like Straal to level the playing field and foster the progress of open-banking payments in all corners of the digital realm.

Problem: Semi-Openness of Corporate Banking

Accepting online payments without middlemen, such as card organizations or acquiring banks is more than just a smart way to reduce the cost of payment processing. Open-banking payments combine the very best features of major traditional payment methods with directness and cost-efficiency of wire transfers. However, due to conservative AML policies, most of the basic business accounts available on the market do not allow receiving very high volumes of consumer-to-business (C2B) wire transfers and seldom offer dedicated IBANs. The former is necessary for accepting payments initiated through open APIs via licenced PISPs (Payment Initiation Service Providers). In other words, many business bank accounts available to merchants actually can be used for accepting direct transfers only if the business has very few customers. At the same time, the access to tech-savvy, risk-tolerant corporate banking remains limited – reserved for big, traditional, and relatively simple businesses trusted by big banks. What, in the case of the card-centric payment ecosystem, has been solved by its hierarchical structure, presence of numerous Payment Facilitators on the market, and the fierce competition between diverse licenced entities with varied risk appetite, now needs to be addressed also by the commercial banking industry. Otherwise, accepting payments initiated via open APIs could become an exclusive privilege of big enterprises.

New Niche Emerging: Commercial Banking for the Underbanked

Traditional commercial banks have been around for ages. Their operational models and core services haven’t changed much since the 1970s. Despite the ongoing global trend of digitization and modernization of the banking industry, most traditional financial institutions still don’t seem ready for the dynamics of the modern-day business environment; a world in which companies are launched in weeks by people from many different countries, often pivoting after just a few months on the market and creating value out of technologies and socio-economic phenomena yet to enter the mainstream.

Banks value stability and generate most of their profit from serving enterprise clients with a reputation earned over years, clear operational models, and transparent books kept by dedicated teams and audited by the Big Four accounting firms. Such enterprise clients can obtain a designated IBAN or get their C2B transfer limits lifted easily. For small and mid-sized companies, especially for digital natives with sophisticated revenue models or complex ownership structures, it is not that easy. The risk that such clients would imply for the bank is disproportionally high in relation to the revenue they can generate. Simply put, open banking payments are creating a new market niche – corporate banking services for underserved industries.

Challenger Banks (EMIs) to the Rescue

If brands such as Revolut, N26, or Bunq ring a bell with you, you are probably acquainted with the concept of challenger banks – fintech companies operating under E-Money Institution (EMI) licences, providing services offered until recently only by traditional banks, yet in a quicker, more convenient, more accessible, and entirely tech-driven manner. What you might, in turn, find surprising is that challenger banks can be found not only in retail banking but also in the static environment of commercial finance. Such entities are developing cutting-edge solutions for businesses underserved by traditional banks – including digital natives, companies with complex ownership structures or just startups with a thin commercial track record.

Features such as dedicated IBANs, quick and smooth KYC verification and account activation, holding multi-currency accounts, and finally, unlimited C2B inbound wire transfers are becoming available to a vast majority of online businesses. All it takes to set up a company account ready for open banking payments is to fill a simple web form, upload a few documents and wait for as few as just 48 hours for activation.

Straal Supports the Open banking Revolution

At Straal, we have recently partnered with two of such disruptive EMIs to provide our merchants with services that will unlock their way to the open banking revolution in payments. Since the launch of our corporate banking offering, we have been observing a steep spike in the number of new merchants joining the community of Straal clients. Our banking partners are fully licenced financial institutions registered in the EU. All the KYC/AML procedures and policies they apply have been verified by European regulators and prove effective. It shows that corporate banking is changing along with the consumer finance industry.

If you want to learn more about Straal Corporate Banking Services, feel free to contact our sales team. To open a corporate account 100% online, visit banking.straal.com and fill our simple application form.