Have You Heard of Open Banking?
Open Banking is designed to improve consumer payment experiences, providing a secure route for financial information sharing between merchants and consumers, including the ability to directly authorise payments for goods or services.
In the UK and Europe adoption of Open Banking has been strong and seems to be progressing throughout the world, most notably in those countries that also adopted digital and mobile payment processing.
Do You PSD2?
The Payment Services Directive 2 or PSD2, is an EU legislation designed to enable consumers within the EU by offering greater control over data and to improve and advance uptake of digital payments.
The Payment Services Directive regulates the way consumers can allow third-party providers secure and permission-based access to their financial accounts, either to collect data or to initiate payments for purchases the consumer wishes to make.
This sharing of financial data known as open banking can be used for a number of innovative services or to provide user-friendly access to existing services. Similar to the advent of online banking, Open Banking ushers in an era of single apps accessing mulitiple financial data sources to provide a global view to consumers, of their current finances.
Open Banking Payments
A current hot-topic since the advent of PSD2 is the ability to take customer payments using Open Banking via Payment Initiation Service Providers or PISPs. This is highly attractive as this frees merchants from many or even all the fees associated with card transactions. It is predicted that uptake of Open Banking payments should quickly outgrow that of card payment processing – possibly as-soon-as 2022.
Consumers will prefer the Open Banking payments process as it is simple and allows use of the consumers familiar online banking interface to authorise Open Banking payments. This avoids the risks associated with making payment by cash or entering card details in a public setting.
This Open Banking payments process also avoids the confusion consumers experience when navigating the myriad payment systems, shopping carts and “dark patterns” that abound in the marketplace today by providing a simple UI for all purchases.
International Open Banking
Another great feature of Open Banking payments for companies trading internationally is the ease at which transactions can be processed across supported countries relative to traditional methods of international card payments.