How is Open Banking transforming the payment industry in Europe?

Open Banking is an industry term that’s often misunderstood. We explain more about how it’s disrupting payments in particular.

Open Banking sounds like a contradiction in terms. After all, banks are not supposed to be open. For centuries, people have been bringing their money and valuables to banks for safe keeping. So now it’s open season?

Not exactly.

Open Banking basically describes a way of securely sharing data held by banks, if the customer consents to this. Some countries mandate a standardized format for this data-sharing.

Granted, this doesn’t sound very exciting. Believe us, it’s sometimes difficult to get those in the industry excited about it. Quite apart from end-users like consumers and businesses.

Much like the internet before the World Wide Web. Or the iPhone before the AppStore. It’s hard to imagine the future when all you can see is the foundational technology rails.

Make no mistake, though. Open Banking is quietly transforming the payment industry in Europe and beyond.

Boost customer satisfaction, conversion and cashflow

Among the many use cases for Open Banking, the stand-out one for us is payment. Open Banking makes it possible for customers to pay direct from their bank accounts quicker, easier and safer than ever before.

The customer experience is slick. Instead of having to log in to online banking go through the process of making a traditional bank transfer, or manually key in card details, customers can make real-time payments bank-to-bank in just a few clicks – without exiting the on-screen journey.

When integrated to a pay-in page, the customer selects Open Banking as a payment method, finds their bank and confirms payment. It’s as quick and convenient as that.

If slicker means quicker and more seamless for customers, the same is true for businesses. Funds are available on account seconds after they’re sent, which benefits cashflow and opens up working capital.

Payments are individually confirmed to both payer and payee or rejected, so businesses have increased certainty, visibility and control over funds.

Cut costs by decreasing fraud and chargeback risks

Open Banking payments are potentially cheaper than cards. Funds move direct from one bank account to another. This cuts out the middlemen in a card payment (typically an acquirer), who may charge for their services. A charge that if not paid by the merchant, may even be passed on to the consumer.

And unlike with cards, there are no chargebacks. Customers initiate transfers by ‘pushing’ funds. As such they don’t have the right to ‘pull’ them back later. This saves businesses the time, cost and back-office hassle of dealing with disputed payments.

Customers know and trust local, bank payments over global card brands, such as Visa and Mastercard. So much so, credit and debit cards only represented around 32% of global e-commerce transaction values in 2022. This is predicted to fall to 26% by 2026, according to card acquirer Worldpay.

So, whether it’s increasing payment acceptance rates and customer satisfaction. Or increasing conversion through increased choice and a seamless user experience. Or cutting costs by decreasing fraud and chargeback risks, we believe that Open Banking is set to continue transforming the payment industry in Europe and beyond. And now is the time to get on-board.