How Open Banking for payments is transforming online payments

Data, as they say, is the new oil, and when it comes to financial data – who purchased what, when and where – access to this data and therefore the relationship between businesses and their customers, is controlled by a small number of established banks. The end result is lower competition, which at a high-street level means less choice and innovation.

The concept of ‘Open Banking’ aims to open up that data and therefore redefine the way consumers, businesses and banks work together through application programming interfaces (APIs) so that third parties can offer new financial services – provided the customer consents of course. But how can online businesses unlock the true potential of Open Banking?

PSD2 and the Open Banking revolution

There is huge potential for Open Banking and a clear case for it being in the public interest, therefore the UK’s Competition and Markets Authority (CMA) and the EU, through their Second Payment Services Directive (PSD2), have both mandated that banks adopt the Open Banking Standard. This in turn creates a single payment market within the EU, allowing for innovation and the cross-pollination of ideas. At the centre of this is banks opening their APIs to other companies, mainly ‘Third Party Payment Services Providers’ (TPPs).

Of course, being ‘open’ could mean that these new standards are possible to exploit. PSD2 began being deployed in January of 2018, but in September of 2019 new authentication and third-party access requirements were put into force and financial institutions had to catch up, delaying the full roll-out until December 2020. Now fully phased in, Open Banking marries both the flexibility and security.

What this means for your company

Online businesses will be able to offer new payment options through Open Banking – particularly custom payment method. By accessing the customer’s account information through the bank’s API, online businesses will be able to:

Allow customers to pay instantly

Open Banking will give online businesses access to Instant Payments infrastructure, meaning that funds can be immediately remitted into your account from the payee.

Eliminate chargebacks

Chargeback fraud, often called ‘friendly fraud’ is a major source of lost revenue and lost goodwill to online retailers. PSD2 does not support chargebacks, allowing companies to offer a much fairer and more efficient dispute resolution service.

Build customer loyalty

Any business can create a branded payment solution, integrating ideas like points and loyalty schemes or delayed payment. Businesses in turn can analyse banking data to target more relevant offers and discounts based on a customer’s transaction history.

Integrating customer data at the checkout

eCommerce companies will be able to embed bank account information into online store checkouts, displaying the shopper’s account balance and transaction history, keeping customers in the store environment longer.

Open Banking is still only getting started, and future applications could include AI-enabled ‘predictive banking’ that anticipates customer demand ahead of time and intelligent personalised Direct Debits that take into account the customer’s lifestyle (when they pay rent and get paid for instance.)

Worldline and Open Banking

At Worldline, we are able to utilise our expertise in the payments space to create custom payment solutions to enable quicker payments and fewer costs.

The complexity of working with the API is handled by Worldline, so your business can concentrate on providing a first-class service to customers. This new development will bring the possibility of using data previously held by banks to give your customers new and more in-depth, compelling payment experiences that increases engagement.

To learn more, you can read our new paper outlining the details of Open Banking and the opportunities for your business. Click here to download your copy.

Learn more about Worldline’s Open Banking solution: https://worldline.com/en/home/solutions/online-payments/open-banking-for-merchants.html