Jack Tenwick, Head of Sales, UK at Yolt Technology Services spoke to PaymentExpert on the offering of Yolt and why PIS adoption can be crucial in boosting SME’s navigation of the pandemic. 

PaymentExpert: Tell us more about Yolt Technology Services and how you have navigated the pandemic?

Jack Tenwick: YTS first launched in 2017 out of the ING Innovation Hub and was the first open banking provider to make an API call. Ever since, we’ve been providing open banking expertise and services to other organisations through our single API. Today, we are the top open banking API provider in Europe by coverage, handling over 26 million successful API calls a week (over 1.5 billion in total), and responsible for c.20% of total open banking API traffic to date in the UK.

We’re continuing to shape open banking’s development in the UK by working closely with the Open Banking Implementation Entity (OBIE), other Third-Party Providers (TPPs) and financial institutions.  While the pandemic has presented huge operational challenges to every business, open banking adoption has accelerated, with the number of people in the UK using open banking enabled services rising from just under a million to over 3 million in 2020/21. YTS has been helping businesses adapt to the accelerated digital shift throughout the pandemic and in October 2020, we became the first Open Banking provider to reach 1 billion API calls.

We’re continuing to see more companies understand the real value of open banking in 2021 and YTS will be spreading the benefits of open banking much wider this year, having been granted full regulatory approvals from the FCA in November 2020 (prior to this, YTS operated under ING’s regulatory licenses). We expect open banking services to be adopted by even more businesses as they navigate through the COVID-19 pandemic. This technology will not only help businesses to streamline and improve their processes, but also to retain and attract new customers.

PE: How significant are transaction fees for SME firms?

JT: Transaction fees are a significant financial burden on SMEs even during times of economic prosperity. In 2019, the British Retail Consortium found retailers spent £1.3bn on transaction fees with third parties, up £70m from 2017, eating into profit margins and quickly becoming a source of great frustration for SMEs.

And with the COVID-19 pandemic causing card use to increase significantly, this frustration has intensified for SMEs that are facing higher costs at a time when profits have fallen. There is simply no place for such considerable fees in a sustainable economic recovery. With a permanent shift to online services currently taking place due to the pandemic, cutting transaction fees will be crucial to SMEs not only to recover but also to plan and construct a business model that enables them to be competitive.

PE: What role do you believe PIS can play in helping SMEs through a challenging period?

JT: PIS is an immediate solution for SMEs to overcome crippling cashflow problems during the pandemic. SMEs can save a considerable amount of money through PIS, as some providers, such as YTS, set a flat-fee per-transaction. This can produce savings of up to 90% against credit or debit card processing fees and means the higher the value of sale of a product, the greater the savings for the business.

At the same time, the risk of chargebacks arising from payment fraud is also reduced. The combined savings from transaction fees and chargebacks could be crucial for many smaller businesses at a time when every penny counts.

And with the strong security and low friction that comes with the PIS option, the customer journey is significantly improved, increasing customer retention rates, and lowering shopping cart abandonment.  PIS also allows consumers to complete transactions through their banking app using the bank’s security measures, meaning the customer doesn’t have to enter sensitive bank account or credit card information at the merchant. The businesses which can offer this slick and secure journey will put themselves head and shoulders above those who can’t.

And as PIS leverages Faster Payments and SEPA Credit Transfer, funds are received instantly, rather than the usual 48 hours, providing comfort for SMEs during a time when many may be struggling to pay bills on time. PIS can also act as a fast, low-friction option to settle an open invoice, making it easier for customers to pay their bills instantly, while also supporting ‘request to pay’ and recurring payment functionalities.  

PE: How has open banking and its importance grown as the pandemic has become increasingly elongated?

JT: Open banking payments provide immediate benefits to businesses by delivering lower transaction costs and instant receipt of funds, which are both critical to businesses at this time of uncertainty. The rise of, and reliance on, online and e-commerce sales channels during the COVID lockdowns further underscores the importance of PIS in delivering these cashflow and cost saving benefits.

In the context of wider open banking, solutions such as Account Information Services (AIS) can be used by businesses to access customer transaction data – with permission – and suggest products and services that are tailored to their unique needs and wants. AIS can also complement existing credit scoring models with an aim of achieving greater financial inclusion and loan application acceptance, which is crucial to supporting many households and SMEs with cashflow constraints resulting from the recent lockdowns.

Also, thanks to data and payment transfer via API connections, open banking is entirely digital, meaning that businesses can continue to support their customers remotely, safely, and securely.

PE: Do you believe PIS can be key in securing a future for many SMEs as we progress from the pandemic?

JT: PIS will be crucial to supporting SMEs as they recover and grow from the pandemic, helping them save thousands on transaction fees, improve cashflow, and deliver a more secure payment process that protects against fraud. Alongside this, customers using PIS will appreciate the speed and security benefits it can bring to their everyday shopping, which will improve retention and boost sales for the SME.