Open Banking vs Wallets: Which is the best solution for payroll and supplier payments?

You can pay suppliers and staff in just a few clicks with bulk payment software, saving time and reducing human error. When choosing a bulk payments provider, you will see open banking and wallet-based software options. In this article, we’ll explain both, highlight their benefits, and help you decide which one best suits your needs.

At a glance: Open banking pulls funds from your business bank account to process payments, whereas with a wallet-based solution, you fund an account from which payments are sent. However, strict restrictions on where, how, and what you can pay mean that wallet-based solutions can actually provide a more reliable and flexible option.

Contents:

• What is the difference between open banking and digital wallets?
• What are the pros and cons of an open banking solution?
• What are the pros and cons of a wallet-based solution?
• Which method is better for bulk payments?

What is the difference between open banking and a digital wallet?

When researching software to automate supplier and payroll payments, you’ll find you generally have two options: open banking and a wallet solution.

• Open banking: Bulk payments software that connects to your bank to send payments.
• Digital wallet: Bulk payments software that sends payments via an e-money account set up for your business, separate from your business bank account.

What are the pros and cons of an open banking solution?

You don't need to top up an account ✅

With open banking, the benefit is that you don’t need to top up your account to make payments.

However, this comes with limitations, as some banks still do not allow you to use open banking solutions, plus, your payments may be subject to the limits and restrictions imposed by your bank:

Restrictions on destinations and amounts you can send ❌

• You are restricted to your bank account daily limits, usually between £50,000 and £100,000. With Barclays, the limit includes all outgoing payments from your account, including any bulk payments scheduled for a future date, as they count toward today’s limit. With HSBC and Monzo, you must stay within your individual user limits, which could pose challenges depending on who connected the bank account.
• Payment limits often apply. For example, banks like NatWest and Royal Bank of Scotland cap bulk payments at £50,000.
• The open banking software you’re using may also impose limits. For example, setting a maximum value for payroll.
• Many banks, like HSBC, Lloyds, and NatWest, limit bulk payments to 25-50 transactions per pay run. Barclays is even more restrictive, allowing only 5-50 payees per bulk payment. Similarly, Starling imposes a monthly cap of 250 payees for bulk payments.
• Banks including NatWest and Royal Bank of Scotland don’t allow first payments to new payees through open banking. To use an open banking solution, you’ll first need to manually add the payee in your bank as a manual workaround. Depending on your bank and the software you’re using, you might also need to authorise each payee individually during a pay run.

Limitations for processing and sending times ❌

• Payments often can't be scheduled. Banks like Lloyds and HSBC, limit scheduling between 30 to 45 days in advance.
• As a manual workaround for scheduling, some software providers suggest waiting to approve payments until the exact date and time you want them to be sent. This means you have to remember to manually approve payments at the right time, which can be inconvenient. Plus they can take funds immediately for future-dated payments, which creates challenges for cash flow and planning.
• Same-day payments are either not possible or restricted to cut-off times. For example, same-day payments with Lloyds are not possible and payments must be submitted by 5:30 PM to be processed the next day. Santander has an even earlier cut-off at 3:55 PM, whilst Metro Bank has a 5:30 PM cut-off for payments above £250,000.
• Payments cannot be scheduled or sent on non-working days, such as weekends and bank holidays. Santander cannot process bulk payments on non-working days. With Metro, if you schedule a payment for a weekend or non-working day, they won't be sent on that day. Instead, they will send it on the next working day.

Lack of approvals and easy processes ❌

• Limited options to add extra users to accounts, making approval flows for payments challenging or impossible. This is especially critical for charities and other regulated entities where multi-approvals are essential. Banks like Barclays and Starling do not offer dual approval for payments. Starling only gives Directors access to bank accounts.
• Banks including NatWest and the Royal Bank of Scotland don’t allow you to include new payees. Revolut also doesn't allow this, nor any business with a one-word name.
• Often you cannot authorise payments until you have funds in the account to cover the payment.
• Bulk payments appear as multiple separate transactions rather than a single debit. With some banks, like Metro, you can enable this if you have certain account types and contact the bank to request this improvement.

What are the pros and cons of a wallet-based solution?

Wallet-based solutions remove that complexity. Not all wallet-based solutions are created equal in terms of approval features, flexibility, and security. It's important to compare providers carefully. With Telleroo you can:

Send little and large payments around the world ✅

• Send bulk payments in 25+ currencies. You can also send GBP globally with ease.
• Send as much as you need in a day - no daily limit! When you join, you’ll set an expected monthly limit to match your business needs. This helps us understand your typical account activity and keeps your transactions smooth and secure. Need to send more? You can easily increase your limit at any time.
• No payment limits with Telleroo. Send large payments with ease, no caps to hold you back. We get to know your business, only flagging any unusual transactions to you for your security, ensuring peace of mind with every payment.
• Send thousands of payments in a single pay run, perfect for large payroll teams.

Create and send payments for any day, at anytime ✅

• Send payments every day, including Christmas and bank holidays. Create and send payments immediately on non-working days or schedule them in advance. Enjoy ultimate flexibility.
• Send payments at any time with Faster Payments, available 24/7 and typically reaching recipients within minutes.
• Easily make same-day payments. Create, approve, and send payments in minutes.
• Schedule and reschedule pay runs as needed, with no limits on how far in advance you can plan.

Standardised easy processes with compliant approvals ✅

• Easily add users to your account by entering their name, email, and phone number. Customise their access by selecting the businesses they can view.
• Control which actions users can take. Viewers can access pay runs but won’t see payees' bank details. Creators can propose pay runs for approval, while Approvers handle the final sign-off. Admins have full control, managing users and account settings.
• Include new payees in pay runs. Telleroo checks if your payee details match the recipient's bank account, and flags anything suspicious.
• Approve payments even without enough funds in your account. Plan ahead by approving and scheduling payments weeks in advance. On the payment date, we’ll try to send the full amount. If funds are insufficient, we’ll make a partial payment and move the rest to "Awaiting Funds." Once your account is topped up, all other payments are sent immediately.
• Bulk payments are consolidated into a single transaction line. When you connect to Xero or QuickBooks, we automatically sync everything back to your accounting software, allowing you to reconcile hundreds of payments with just one click.

You need to top-up an account ✍️

With a wallet-based solution, you need to top up your account. While this might seem like a downside at first, it's one simple action that streamlines your entire bulk payments process. It’s a small step for a big win.

A separate wallet account also adds an extra layer of security. By keeping your primary bank account separate, you protect it from risks like fraudulent invoice scams and protect your main funds. It’s a smarter, safer way to manage payments.

And if you’re using software like Telleroo, topping up is quick and hassle-free. Whether on your computer or mobile, you can easily transfer funds. We even prepare the payment for you in your bank account. Top up with an amount specific to a single pay run, or transfer enough to cover multiple pay runs now and in the future.

Which method is better for bulk payments?

With all the limitations on where, when and how you can send payments, an open banking solution gives you three main problems:

1. Partial implementation: You may end up making both manual and bulk payments. If you have a large payment or your payroll includes too many payees, you may need to process it manually. If your bank doesn’t support same-day payments, urgent requests will need to be processed manually.
2. Inconsistent processes: You end up having inconsistent processes within accounts payable. This becomes even more challenging if you're managing multiple entities within a group or working as an accountant or bookkeeper with several clients. Every banking setup is different, with unique restrictions and processes to navigate for each company.
3. Limited controls: Mismatched payment management makes it hard to control approvals and track payments. Without proper systems, enforcing authorisation policies and ensuring compliance becomes difficult. This can lead to errors, fraud, or unauthorised transactions.

A wallet-based solution like Telleroo removes that complexity.

You have one standardised process with complete implementation across business(es), regardless of which bank is used for company funds. These payments can be fully controlled with custom approval workflows, allowing for “four-eyes” checks and other compliance needs. Plus, you can connect with tools you already use (like Xero and leading payroll platforms).

This allows you to:

• Reduce risk: Safeguard your main bank account by using a separate e-money account for supplier and payroll payments. Avoid errors from inconsistent banking processes or manual data entry. Benefit from enhanced security with payee and payment checks, approval workflows, and more, giving you peace of mind every step of the way.
• Implement compliant controls: Charities, multi-entity organisations, and regulated businesses get the controls they need to use and reap the benefits of bulk payments.
• Create flexibility: Make payments on your terms, tailored to fit your business and cash flow needs. Use workflows that fit your team and eliminate time-consuming manual tasks.

Sign up to Telleroo, and begin making quick, safe and easy bulk payments.