Open banking is a death knell for card payments

With any kind of retail, the pay­ment expe­ri­ence is cru­cial. It’s why Ama­zon has been tri­alling cashier­less gro­cery stores in the UK. No phys­i­cal pay­ment card is need­ed. Shop­pers put items in their bas­ket and leave. Dur­ing the pan­dem­ic, con­sumers aban­doned cash for con­tact­less. The next move is towards open bank­ing, allow­ing mon­ey to move direct­ly from people’s accounts.
Cash­less and mobile pay­ments, more online deb­it card usage, as well as the growth in ecom­merce, were around before the coro­n­avirus hit. Yet COVID-19 has accel­er­at­ed the shift to more fric­tion­less dig­i­tal mon­ey trans­ac­tions. More than 12 months since the first lock­down and an increas­ing num­ber of “dig­i­tal first timers” are pur­chas­ing online. Now every­one is used to this new nor­mal.

“The public’s behav­iour has shift­ed into the future. Many more con­sumers expect speedy, sim­ple, secure and con­ve­nient pay­ment expe­ri­ences. There is no going back to greater fric­tion. An increase in the UK’s con­tact­less pay­ment lim­it helped. Open bank­ing pay­ments are now a nat­ur­al pro­gres­sion. It’s why it’s one the fastest-grow­ing pay­ment meth­ods in the UK and Europe,” explains Cia­ran O’Mal­ley, vice pres­i­dent of part­ner­ships at Trust­ly, a glob­al leader in open bank­ing.
Trust­ly, a fast-grow­ing uni­corn, which processed more than $21 bil­lion in trans­ac­tions glob­al­ly dur­ing 2020, is pow­er­ing the shift to a card­less soci­ety.
Among mil­len­ni­als and Gen­er­a­tion Z shop­pers, there’s even greater move­ment when it comes to pay­ments. More than half of 16 to 24 year olds and 45 per cent of 25 to 35 year olds now use fin­ger­print or face ID rather than enter card details to make pay­ments, accord­ing to a Europe-wide sur­vey of 10,000 con­sumers. In Chi­na, the val­ue of card­less pay­ments is now greater than the rest of the world’s deb­it and cred­it card pay­ments com­bined.
“Open bank­ing pay­ments using a consumer’s bank login to authen­ti­cate the user is a nat­ur­al pro­gres­sion for mul­ti­chan­nel pur­chas­es in a post-COVID world. If I want to buy some­thing online and pick it up in-store, flex­i­bil­i­ty when it comes to pay­ments is cru­cial. This is true if goods are deliv­ered to my home and I pay for what I keep, or for more expe­ri­en­tial retail where I access dif­fer­ent ser­vices in-store,” says O’Mal­ley.
“Pay­ments are increas­ing­ly merg­ing with dig­i­tal iden­ti­ty for ease of use, involv­ing bio­met­rics. This also elim­i­nates iden­ti­ty fraud. It’s the new fron­tier. Fees are also going up for cred­it and deb­it card pay­ments, which impacts retail­ers. The cost of cross-bor­der trans­ac­tions are ris­ing as well; reg­u­la­to­ry issues around Brex­it haven’t helped.
“Trust­ly sup­ports more than 6,300 banks and enables over 525 mil­lion con­sumers to pay at 8,100 mer­chants across 30 coun­tries. By bypass­ing the card rails, the open bank­ing leader can offer pay­ments that are free for con­sumers and up to 50 per cent cheap­er for mer­chants than cards. This is Trustly’s secret sauce.”
For busi­ness­es to grow inter­na­tion­al­ly, they need to be able to make fric­tion­less trans­ac­tions, not pay up to 1.5 per cent or more for cross-bor­der charges. What could also dri­ve fur­ther adop­tion of open bank­ing and online bank­ing pay­ment ser­vices is instant refunds. This dif­fers from pay­ments made by card where a refund can take sev­er­al days to arrive after the returned goods have been received by the mer­chant.
“It’s an under­in­vest­ed area that can improve cus­tomer expe­ri­ence. This fea­ture has proven to increase rev­enue and cus­tomer loy­al­ty. If con­sumers are offered instant mon­ey back, they will choose this so they can make new pur­chas­es right away. The fact is, pay­ment process­es don’t need to be com­plex, they just need to work real­ly well,” says O’Malley.
In the future, lega­cy phys­i­cal cashier tills in stores could become irrel­e­vant. More cus­tomers will click online and pick up in-store know­ing that a pay­ment is made when they cross the thresh­old. It’s a world where trans­ac­tions are not lim­it­ed by the shop­ping chan­nel con­sumers use. Large stock inven­to­ries won’t nec­es­sar­i­ly be need­ed in stores. This will enable retail­ers to offer a greater range of ser­vices, prod­ucts and seam­less expe­ri­ences.
“Open bank­ing and online bank­ing pay­ments are a nat­ur­al fit for the 21st cen­tu­ry, omnichan­nel shop­ping expe­ri­ence. This evo­lu­tion pro­vides ulti­mate flex­i­bil­i­ty for the cus­tomer,” says O’Mal­ley. “This is what it’s all about.”

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