ERP software has already been one of the biggest beneficiaries of open finance since the beginning of this new model. Now, with Payment Initiation, ERPs can become even more attractive to companies of all sizes.
Table of Contents
- A little bit of context
- What is Open Finance Payment Initiation?
- After all, what ERPs get out of it?
A little bit of context
Open Finance Payment Initiation is a service that allows any online platform the ability to process payments for a product or service digitally with money directly from the consumer’s account balance. Without the need for a redirection to the bank’s app or website, payment initiation dramatically reduces the friction in the experience present today.
Without a doubt, one of the biggest beneficiaries of this new modality are the ERPs, which manage the finances and payments of several companies and can have their processes strongly optimized with the presence of this new technology.
But after all, what makes ERPs and payment initiation such a great potential combination?
What is Open Finance Payment Initiation?
Simply put, we now have available a very secure, inexpensive and frictionless automatic account debit payment method. If friction is an obvious advantage over current methods, with advantages in several other aspects, such as transaction cost, settlement time, availability and security.
We can define Open Finance Payment Initiation by 4 main characteristics:
- This is a capability of an API that is regulated by a governmental entity;
- It allows merchants and service providers to initiate payments by connecting to these APIs;
- In this case, the payment is initiated directly from the payer’s account;
- Authentication, which guarantees the legitimacy of the payment, is done by the payer through the bank.
The table below makes a brief comparison between payment initiation and other methods, such as credit cards, taking these aspects into consideration:
| Cash | Bar Code | Credit Cards | Payment Initiation | |
| Transaction Cost | Low | Low | Very High | Very Low |
| Settlement Time | Very High | High | Very High | Very Low |
| Availability | Low | Low | Very High | Very High |
| Security | Very Low | Very Low | Very Low | Very High |
| Friction | Very High | High | High | Low |
It is worth pointing out that payments methods such as Pix in Brazil emerged within the scope of Open Finance innovation – and that the payments initiation is nothing but another step on the road to innovation. We tell you a bit more about this whole revolution we have been experiencing in the payments industry in Brazil in this text in our blog.
After all, what ERPs get out of it?
Any new frontier that is crossed within the financial infrastructure market opens up a huge space for innovations of all kinds. While APIs are the main tools to make Open Finance reach its full potential, the innovation lies with the companies that make use of the available infrastructure to improve their processes, reduce the chance for error, and delight their customers.
ERPs (or Enterprise Resource Planning) are helping companies by centralizing all the information and activities of different sectors, such as sales, finance, inventory, and human resources. Much of its performance goes through accounting, simplifying and making more fluid the management of accounts payable and receivable, sales monitoring, and order tracking. With this in mind, payment initiation is a way to centralize even more activities of each one of clients, in a quick and frictionless way.
ERP providers usually work with many customers who have to pay different suppliers, bills, staff, and others, and this flow can be pretty clunky. With Open Finance and Pix, that flow can be made much better, without that much friction”
Jeronimo Llacay, Product Manager at Belvo
The ERPs have been one of the players in the market that has most leveraged the advantages that open finance makes available. A good example is Nibo, a company that already has more than 300 thousand clients among accountants and small and medium companies.
Through Open Finance, they were able to reduce the amount of manual work and, consequently, the incidence of operational errors – this using only the aggregation products, already present in the first phase of the model implementation.
Now, with payment initiation, ERPs can break yet another paradigm within their products and further unify their customers’ operations by offering the payment initiation service within their platform. Combining the service of managing the companies’ finances with also moving their transactions, in a fluid and automated way and in a single platform, is an extremely valuable solution for operators and customers.
If this product can already be revolutionary for small and medium-sized businesses, it can serve as an important lure for ERPs to win the attention of CFOs of large companies. The ability to move amounts towards thousands of different bank accounts in a matter of seconds becomes exponentially more attractive as the company deals with more suppliers, employees and service providers – so the larger the company, the more it will benefit from automation of this kind.
Another obvious benefit of payment initiation is that it can eliminate the possibility of fraud and errors, an ever-present risk when we are subjected to manual labor.
“ERPs have a unique opportunity before them to consolidate their business with a much more sophisticated product that will become indispensable for companies of all sizes.”
Albert Morales, General Manager at Belvo
With the effective initiation of payments and the expansion of use cases in Latin America, the expectation is that, as in other Open Finance fronts, ERP software will be at the forefront of innovation, making the most of the novelty in financial infrastructure.
If you are interested in solutions related to payment initiation or even other solutions that Open Finance offers, such as aggregation and enrichment, please don’t hesitate to contact us – we are eager to hear your ideas 😉
