How Open Banking Payments Will Help Businesses Keep Up
The pandemic has forced consumers to spend more online and alerted them to the benefits of digital payments.
With our research finding that 20% of UK consumers reported that the pandemic had changed the way they think about paying for products and services, it’s no wonder open banking is taking center stage.
Open banking is accelerating innovation in the payments industry and giving forward-thinking businesses of all sizes a competitive advantage by enabling them to offer customers flexible options at checkout.
And the UK is leading the charge of digitization in this space. Open banking payments are currently growing at a rate of 500% year over year, with more than 5 million open banking transactions taking place in May alone according to the Open Banking Implementing Entity ( OBIE).
But as open banking evolves, despite the tremendous progress made in recent years, there remain many aspects of financial systems that rely on decades-old legacy models.
Products such as digital invoicing, which emerged during the recent digital payments boom, help businesses increase efficiency and productivity. And with policymakers across the European Union set to roll out open banking solutions to improve tax collection and fraud prevention measures, digital invoicing is a promising area of growth.
With endless possibilities, there’s no time to waste. As consumers and businesses adjust to a new era of financial literacy, disruption is the new normal.
That means merchants who don’t yet offer a range of online and in-store payment options are likely to fall behind. Now more than ever, businesses simply cannot afford to lose customers due to shopping cart abandonment and slow checkout processes. To do this, they must ensure that their payment processes do not put additional obstacles in the way of their customers.
Yet many are still slow to embrace the benefits of open banking technology, despite the industry’s growth.
Faster payments turn first-time buyers into repeat customers
It is clear that tolerance for problems at checkout is hitting new lows. Recent research shows that 78% of consumers won’t make online payments if they have to enter additional information at checkout. Merchants need a solution, and that’s where open banking comes in – with no additional information required to complete transactions, users can make a purchase by simply selecting their bank and authorizing payment at using biometric authentication.
Plus, none of this requires third-party payment processing, meaning open banking is a completely seamless experience. So, with payment friction soon a relic of the past, automated payments will play a huge role in retention and help convert new customers into familiar friendly faces – it’s a win-win for businesses.
Offering reliability and security will promote customer loyalty
Consumers want to protect their finances more than ever, which is accelerating the growth of open banking. Our research found that nearly half (48%) stress the importance of checking whether a service is verified by a banking or payment regulator, while a further 51% of consumers express concern and reluctance to use a payment method. payment from an unknown brand or supplier.
Payment solutions powered by open banking can help alleviate these concerns, giving consumers full control over how their financial data is used and who can access it. On top of that, consumers also have peace of mind that their payment solutions are powered by an established and reputable brand, giving them the reassurance and confidence they need to use it again and again.
The fact that every open bank payment is authenticated by the bank only reinforces this, as third-party providers do not store sensitive personal information or passwords. From a business perspective, compliance with Strong Customer Authentication (SCA) requirements is built into the product, meaning it’s one less thing to worry about for businesses.
Open banking is already a game-changer for consumers and businesses, and it’s not going to stop. Businesses have what they need to meet the growing demand for a faster, frictionless checkout experience – now it’s a question of when they will benefit.