The arrival of Open Banking represents a seismic shift in the way consumers and businesses use financial services. By giving regulated third-parties secure access to financial information, it is shaking up an industry that has been difficult to access – inviting more competition and stimulating innovation.
For consumers, Open Banking is better suited to meeting the needs of our increasingly digital society – offering greater choice and access to highly personalised services. For businesses, it presents the opportunity to create exciting new financial products that are more secure and cost-effective than ever before.
A one click society
Thanks to the rise of mobile apps, voice assistants and streaming media, consumers now expect quick and seamless experiences with every digital interaction. And payments are no exception – indeed, contactless payments accounted for 19% of all payments made in the UK in 2018.
In addition, consumers are increasingly customers of more than one bank or hold multiple accounts and access to accounts via mobile app has become the norm. The result is that everyone now carries a payment device in their pocket.
Account transfers traditionally presented considerable friction for the payer, with account details requiring manual entry. These have been left behind in the one-click revolution. Until now.
One of the new developments arising from Open Banking allows approved payment processors to set up (initiate) an account transfer payment for the payer to authorise in their online banking or mobile app. Termed “Open Payments”, this form of digital payment doesn’t require data entry from the payer, reduces settlement time for the payee and, in some cases, instant reconciliation.
Not only is the experience faster for all parties, it’s also more secure than other payment methods. And, with fewer parties involved in the payment process, Open Payments are also significantly more cost-effective for businesses than traditional debit or credit card payments.
How Open Payments work
Leveraging Open Banking technology, Open Payments allow people and businesses to pay directly from their account, in real-time. It’s safer, faster and more cost-effective than other payment methods available today. Here’s how it works.
The process starts when a payer is prompted to pay using Open Banking. An Open Payment request can take the form of simple web links, so lend themselves well to many payment scenarios. Here are a few examples of how the links can be displayed.
The payer’s view
When a customer opts to pay using Open Banking, they are first asked to select their account provider from a list. They authenticate and sign into their account as normal via online banking or mobile app. When logged in, they are presented with the payment details and asked to authorise the payment. The payer is then shown a confirmation of payment before being redirected back to the business they are buying from.
Check out the payer’s view of Open Payments in our explainer video:
Find out more about Open Banking payment technology in our white paper: From Open Banking to Open Payments – a better way to pay, and get paid.