As the world shut down due to COVID-19, there was a knock-on effect on e-commerce and digital transformation as consumers turned to online shopping. Businesses quickly adapted to this sudden change in behaviour, investing further in increasing a positive online shopping experience. Online payments, which have been growing steadily in previous years, had a dramatic growth in this period. According to a global report from ACI worldwide, in March 2020, retailers experienced an increase of 74% in online payment transactions. In fact, more than 70.3 billion real-time payment transactions were processed globally in the entire year of 2020, a rise of 41% compared to 2019. Statista market outlook stated that 63% of the online payment transactions in 2020 were from e-commerce.
While restrictions have slowly been eased globally, consumer behaviour looks unlikely to return to its pre-pandemic norm. Companies have been pressured to implement payment options that meet the needs of their growing online consumer base. Today, customers expect payment services that are personalised, streamlined, and centralized.
Many online retailers are still behind and failing to fulfil their customers’ needs regarding the payment experience. Customers expect various payment options, putting pressure on businesses to implement new systems that can be complex to integrate. Online retailers that offer a high diversity of payment options such as cards, digital wallets, direct debit, and bank transfer experience report higher customer spend and retention. But there are still many issues with some of these payment options causing negative business impacts. The common issues experienced are:
For example, businesses may experience reduced profit margin due to high fees from credit card providers, varying from 1% - 4%. On top of this, issues relating to fraud are a huge problem. In fact, Action Fraud reported a 400% increase in fraud in March 2020 due to a sudden surge in online spend. Even though secure payment transactions is necessary, financial institutions need to ensure that all these strict measures don’t affect the customer experience negatively (Open Banking Was Only the Beginning, Forbes). The online payment journey poses a significant concern for businesses as most customers will abandon their check out if the process is complicated.
Numerous businesses have started using open banking to reduce payments fees and meet evolving customer expectations. A recent Forbes article mentioned that in the next 3-5 years, 76% of global banks predict that usage and customer adoption of open banking applications will increase by 50%.
Businesses can have a significant competitive advantage by making the checkout process smoother. The current average number of steps in a check out is 5.08, which is far from a frictionless payment service. Open banking provides the opportunity to improve user experience by simplifying the payment journey. The simplicity of confirming the payment via banking app or webpage is much more convenient than manually typing credit card and billing address details. Human errors are eliminated by removing these unnecessary steps, reducing the number of customer support cases. The payment process in open banking is so streamlined that it eliminates additional online forms and other security steps. The login is made via fingerprint, facial recognition, or other methods, substantially reducing the time the customers spend on the payment transaction.
Open banking is also popular due to its decreased risk of fraud and associated costs.
Even refunding a purchase is more efficient as businesses have control over the refund process. Making a refund via a card provider can take up to five working days. With open banking, the customer receives the money back in less than a day. Open banking will contribute to a smoother and safer payment journey and a substantial increase in profit.
For companies with international customers, open banking also enables receiving payments from abroad. The merchant needs to ensure that the open banking provider can receive payments from the countries where the international customers are located. After establishing open banking, there is a huge reduction in high fees, excessive exchange rates, and payment processing time. Receiving international payments is now far more straightforward. The UK and EU are ahead in offering bank-to-bank instant payments, and other countries worldwide will follow this trend.
At Inpay, we offer massive cost savings and enhanced transaction speed with our open banking solution for international payments. You’ll increase customer satisfaction and retention when you add open banking payment options to the mix. Our solution has heightened compliance with strict KYC and AML checks. Your customer will benefit from the convenience and security of paying directly from the bank account, instead of having to top up a wallet or type a credit card number.
Reap the benefits that open banking has to offer and secure your business a promising future. Read more about our open banking for international payments solution here.
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