How to get hospitality back on its feet? Harness Open Banking.

Matt Cockayne, CCO of Yapily

The hospitality sector has been brought to its knees by Covid-19. With pubs, restaurants and bars closed for nearly three months, countless big names have been forced into tight corners. The likes of Pizza Express, Carluccios and Chiquitos have all been forced to announce a raft of site closures and job losses in an attempt to stem the cash loss during the lockdown period. 

While the government’s ‘Eat Out to Help Out’ scheme has seen more than 64 million meals claimed since its launch at the start of August, it’s clear there’s no silver bullet for the industry. But there is something that will help get hospitality back on its feet – Open Banking. 

Hospitality’s hidden payments problem

With the majority of bars and restaurants now refusing to accept cash, provide physical menus or allow patrons to order at the bar, many are turning to mobile apps to remain Covid-19 safe while allowing customers to return. These apps enable the public to browse menus and, crucially, pay for their meal or drinks at their table, all from within the app or via a web page. 

No doubt this is a great thing. It not only keeps customers and hospitality workers safe, it also, theoretically, speeds up the ordering process and increases efficiency for management. However, the most common methods of payment on these apps are mobile wallets – ApplePay and GooglePay – or traditional card rails i.e. Visa or Mastercard. These are often expensive for restauranteurs – as they’re still required to pay up to 3% in merchant fees. 

On top of this, hospitality business owners don’t receive funds from patrons instantly – in some cases they have to wait up to two days for their takings to land in their accounts. Given how hard the industry has been hit by Covid-19, having to wait days to receive money from card companies is making an already tight financial situation even worse. Without access to all of their liquidity at any one time, restaurants and bars will struggle to manage their cash flow and may not bounce back. 

Open Banking will lead to open bars

The majority of card payments have fees at multiple points for merchants, acquirers and issuers. But, payments made using open banking are significantly cheaper. In fact, according to our latest research, the travel and hospitality sector could save a massive 88% on transaction fees if they switched to open banking – a saving equivalent to £3,180,000 across the industry in the UK. 

While it’s unlikely we’ll ever see completely fee-less transactions, Open Banking is broadening the payments market and we’re starting to see both percentage based models and fixed fee players enter the space. This is creating much-needed competition and will lead to even more payments innovations – which will ultimately help hospitality get back on its feet. 

Open Banking also enables restaurant owners to receive funds from customers instantly, so they can consolidate their company accounts. Using an open banking API, they are able to access customers’ accounts, with their permission, to reconcile payment for food and drinks. This not only reduces the admin burden of tracking cashflow, it also means restaurants and bars can keep more of the hard-earned cash they so desperately need right now in their own pockets to keep doors open. 

An additional benefit of Open Banking is that it is incredibly secure. Built on systems that had already developed principles like Strong Customer Authentication (SCA), such as mobile banking applications, Open Banking helps to mitigate the risk of fraud.

Getting hospitality back on its feet

Pre-Covid the hospitality industry was dragging its feet when it came to digitisation. But since lockdown, we have seen what would have taken five years to adopt, be brought to bars and restaurants in a matter of months. But mobile apps to order from the table are only one part of the technology revolution hospitality needs to undergo to bounce back from the pandemic. 

Harnessing Open Banking will enable restaurants and bars to make significant savings on their payments, while giving them greater visibility over their cash flow in the long-run. Ultimately helping them to keep their doors open, staff paid and the beers flowing. A win-win for all. 


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Matt Cockayne Yapily

Author: Lauren Towner