# How can Open Banking help SMBs navigate the cost-of-living crisis?  Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-07-20 Category: BANKING Category URL: https://financedigest.com/category/banking Meta Title: Navigating the Cost-of-Living Crisis: Open Banking Meta Description: Discover how small and medium-sized businesses can benefit from open banking to improve cash flow and build genuine connections with customers in times of crisis. URL: https://financedigest.com/how-can-open-banking-help-smbs-navigate-the-cost-of-living-crisishtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/istock-12719877161-1736815571310-compressed.jpg) _By_ **_Dawn Beeby,_** _Sales Director, Nuapay_ 2022 has been a challenging year for us all. The [cost-of-living crisis](https://www.financedigest.com/british-shoppers-defy-cost-of-living-crisis-at-christmas.html "British shoppers defy cost-of-living crisis at Christmas"), coupled with ongoing supply chain disruption, has left businesses facing an uncertain and unpredictable future as they try to remain resilient. According to Barclays, more than [three-quarters](https://home.barclays/news/press-releases/2022/05/lovely-jubilee--many-smes-to-welcome-a-royal-boost-as-revenues-p/) of small and medium-sized companies are worried about the long-term impact the rising cost of living, soaring energy bills and record inflation will have on their business. Further, almost half are reportedly pessimistic about the [outlook for the wider UK economy](https://www.financedigest.com/thomson-reuters-keeps-outlook-but-wary-of-slowing-economy.html "Thomson Reuters keeps outlook, but wary of slowing economy"), while two-fifths believe that the current business environment is unstable. Many SMEs have reacted with agility, plotting a course to navigate them out of troubled water. Many have taken the tough decision to raise prices, while others have sought to end third party contracts and [scale back](https://www.financedigest.com/mifid-ii-why-you-should-not-scale-back-your-implementation-efforts.html "MIFID II: WHY YOU SHOULD NOT SCALE BACK YOUR IMPLEMENTATION EFFORTS") growth plans. While these steps are vital, they do little more than preserve [cash flow for businesses](https://www.financedigest.com/europe-burns-cash-to-help-businesses-in-deepening-energy-crisis.html "Europe burns cash to help businesses in deepening energy crisis"). The measures outlined above do not mutually benefit the consumer, which could hamper loyalty once normality eventually resumes. To emerge from the crisis stronger, small and medium-sized companies must opt for tools and solutions that not only help them to [save money](https://www.financedigest.com/how-to-save-money-for-a-car.html "How to save money for a car") in the short term across operations, but build genuine connections with new and returning customers. This is key to creating long-term stability. The importance of the payments journey itself cannot be overlooked here, but more critically, emerging [technologies such as open banking](https://www.financedigest.com/6-technology-trends-banking-2019.html "6 Technology Trends for Banking in 2019"). [**Consumers are already changing how they pay**](https://www.financedigest.com/best-paying-jobs-in-finance-consumer-services.html "Best Paying Jobs in Finance Consumer Services") Since the cost of living has risen, almost half of all consumers have changed their payment habits, with many opting for methods that enable them to track spending more accurately. Even [habits which were adopted relatively recently are changing](https://www.financedigest.com/how-brands-can-adapt-marketing-tactics-to-better-suit-customers-changing-shopping-habits.html "How brands can adapt marketing tactics to better suit customers’ changing shopping habits"). **​​The past two years have seen the meteoric [rise of Buy Now Pay](https://www.financedigest.com/unicredit-shareholders-urged-to-reject-ceo-orcels-pay-rise.html "UniCredit shareholders urged to reject CEO Orcel’s pay rise") Later (BNPL) services, with people having more money in their back pockets to spend on goods and services. However, with almost [one in 10](https://www.hl.co.uk/news/tags/newsroom) people having recently used BNPL schemes to cover essentials, the Financial Conduct Authority has urged caution. While consumers can be enticed by the offer of no fees and low interest rates, BNPL services ultimately lack regulation in how they are promoted.** **Enter** [open banking](https://www.financedigest.com/open-data-represents-the-biggest-challenge-to-banks-in-a-generation.html "Open data represents the biggest challenge to banks in a generation") In times of crisis, with consumers drawing back the purse strings, [open banking](https://www.financedigest.com/how-will-open-banking-impact-the-customer-experience.html "How will Open Banking impact the customer experience?") offers a safer and more secure alternative way to pay that does not encourage overspending. By adopting open banking based payments, consumers can pay by [bank transfer, sending funds directly from their bank account](https://www.financedigest.com/are-banks-ready-for-the-new-accountability-regime-in-2016.html "ARE BANKS READY FOR THE NEW ACCOUNTABILITY REGIME IN 2016?") to the merchant. It is fast and secure, all with no cards and no data entry. Every time a payment is [made consumers will view their bank](https://www.financedigest.com/fintech-v-the-banks-uneasy-bedfellows-or-a-match-made-in-heaven.html "FinTech v the Banks: Uneasy Bedfellows or a Match Made in Heaven?") balance, unlike traditional payment methods. In turn, this gives them more oversight of their finances. For this reason, it is likely to [become a preferred payment option for consumers over the coming years](https://www.financedigest.com/2022-the-year-future-payment-trends-become-reality.html "2022 – the year ‘future payment trends’ become reality?") – businesses which offer it will reap the rewards. **[Benefits extend to businesses](https://www.financedigest.com/does-the-cloud-benefit-modern-business.html "Does the Cloud Benefit Modern Business?"), too** For small-and-medium sized businesses, [open banking](https://www.financedigest.com/barclays-private-bank-opens-new-office-in-verbier-switzerland-for-2022-23-ski-season.html "Barclays Private Bank opens new office in Verbier, Switzerland for 2022/23 Ski Season") enables an improved cash flow. [Merchants receive payments](https://www.financedigest.com/how-payment-institutions-can-leverage-data-to-support-merchant-customers.html "How payment institutions can leverage data to support merchant customers") in real-time, and therefore provide immediate access to funds. Refunds can also be credited back to customers in real-time, improving the [customer experience](https://www.financedigest.com/visionary-banks-fight-the-blur-hybrid-computing-architecture-brings-a-faster-sharper-customer-experience.html "Visionary banks fight “the blur”: Hybrid computing architecture brings a faster, sharper customer experience") further. Our own research found that, for merchants, consolidated reporting was one of the greatest perceived benefits of open banking – an answer perhaps driven by the current economic climate. It’s notable that respondents did not list ‘reduction in fees’ in the top three benefits, indicating that they [value open banking as a superior payment](https://www.financedigest.com/2021-predictions-realising-the-value-of-payments-transformation.html "2021 Predictions: Realising the Value of Payments Transformation") method, rather than simply being cheaper. Even away from payments, open [banking can become](https://www.financedigest.com/banks-need-to-become-a-lifestyle-brand.html "Banks need to become a lifestyle brand") a force for good, improving affordability for those who are vulnerable and helping them to break debt cycles. At its very core, open [banking aims to offer tailored financial](https://www.financedigest.com/financial-crime-is-the-chink-in-the-banks-armour.html "Financial crime is the chink in the banks’ armour") support to meet the needs of individuals. In a year set to be defined by tight margins, open [banking can make a considerable difference for consumers](https://www.financedigest.com/30-per-cent-of-uk-consumers-would-use-amazon-google-facebook-or-apple-for-banking-services.html "30 Per Cent of UK Consumers Would Use Amazon, Google, Facebook or Apple for Banking Services") and merchants alike. By refining the payments experience, merchants can improve customer conversion and loyalty throughout what’s [set to be a challenging time](https://www.financedigest.com/oneweb-eutelsat-set-for-secondary-london-listing-the-times.html "OneWeb-Eutelsat set for secondary London listing – The Times") for us all. Ultimately, ​​open [banking can help us to improve the financial resilience of a nation in need](https://www.financedigest.com/britains-digital-banks-need-support-amid-banking-turmoil-trade-body.html "Britain’s digital banks need support amid banking turmoil – trade body"). The onus is now on retailers, regulators and charities to educate [consumers on the benefits it brings](https://www.financedigest.com/incoming-starbucks-boss-to-bring-consumer-insight-to-coffee-culture.html "Incoming Starbucks boss to bring consumer insight to coffee culture"). Crucially, this must be achieved faster than the initial rollout stage – our ability to navigate the highest [rates of inflation](https://www.financedigest.com/german-inflation-rate-to-ease-over-course-of-2023-econ-minister.html "German inflation rate to ease over course of 2023 – econ minister") in a generation depend on it. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---