How Open Banking Keeps Spend Management FinTechs Agile

With the pandemic ravaging the business travel market, travel and expense management FinTechs have had to think on their feet and adjust to the new market realities of a decline in travel and entertainment (T&E) spend.

Volatility often breeds innovation, however, and many FinTechs have found new opportunities within a changing landscape. One of them is U.K.-based Sweep, which wields open banking for its expense management technology targeted toward small- to medium-sized businesses (SMBs).

While the pandemic hasn’t entirely depleted SMB spend, CEO and Founder Billel Ridelle said Sweep has seen significant shifts in the kinds of companies that need certain services to manage their spend. As he told PYMNTS, the health crisis has opened up new doors for the company to build solutions on the back of open banking, and to adjust to the reality of a world without business trips (for now).

The Pandemic’s Impact On Spend

The U.K.’s open banking framework has enabled FinTech companies to pool the bank account data of users and create solutions that help end-users make sense of that data. For Sweep, that means linking into corporates’ and employees’ bank accounts to gather information about how professionals are spending company cash.

In a pre-pandemic world, this was a valuable technology that allowed companies to oversee employee spend and, in real time, identify potentially fraudulent transactions and ensure that spending adhered to company guidelines.

While today business trips remain canceled, Ridelle said open banking-based expense management technology remains valuable as some businesses’ spending has remained steady despite market disruption.

“Some industries have seen an increase in activity during the lockdown,” he noted, adding that a lot of firms that offer logistics and delivery services, as well as businesses in the construction arenas, continue to see healthy spending volumes and thus need technology to help manage that spending.

Further, while business travel has disappeared, Ridelle said many firms are bracing for trips to return as early as March 2021 and are thus looking for FinTech solutions that can help manage T&E spend as it picks back up.

Open Banking’s Influence On FinTech

The pandemic hasn’t completely destroyed SMB spending volumes, keeping T&E solutions relevant for many businesses, particularly as market volatility has made it even more imperative to stick to a budget.

However, spend remains down for many entities.

“Expenses are very intimately linked to employee mobility,” said Ridelle. “When you have most or all of your workforce working from home, the level of expenses you will produce as a company is going to come down.”

While that might initially seem like a major roadblock for companies like Sweep that have built technologies with a focus on this spend, Ridelle said the company’s use of open banking has created the opportunity to expand its product suite into other areas of financial management.

Sweep announced an equity crowdfunding campaign on Seedrs, with its growth trajectory focused on this goal of flexing open banking’s muscles in other areas like accounts payable, VAT returns, cash flow forecasting and financial reporting. Sweep has also identified open banking’s payments initiation function as another significant opportunity to expand functionality.

“A clear example is we will be able to not only validate expense reports against company policy automatically, but once it’s validated, we can go into a company’s bank account and initiate a refund,” explained Ridelle. “A refund might take multiple weeks — sometimes months — to go into an employee’s bank account.”

With payment initiation, that process can be cut down to 24 hours or less, he said.

For many FinTechs in today’s market, flexibility is essential to readjusting to the quickly changing needs of end customers. Open banking, said Ridelle, provides that flexibility to develop new products and services that can not only protect the revenue streams of B2B service providers like Sweep, but can also help SMBs better manage their cash in an increasingly high-pressure market.