How open banking payments will help businesses keep up
The pandemic forced consumers to spend more online and alerted them to the benefits of digital payments.
With our research finding that 20% of UK consumers reported the pandemic changed the way they think about paying for products and services, it’s no wonder that open banking is taking centre stage.
Open banking is accelerating innovation within the payments sector and providing forward-thinking businesses of all sizes with a competitive edge by giving them the license to offer customers flexible options at checkout.
And the UK is leading the charge to digitalisation in this space. Open banking payments are currently growing at a rate of 500% year on year, with over 5 million open banking transactions being made in May alone according to the Open Banking Implementation Entity (OBIE).
But while the open banking sector is evolving, despite the huge amount of progress made in recent years, there remains many aspects of financial systems that are based on decades-old legacy models.
Products such as digital invoicing, which emerged during the recent digital payments boom, help companies increase efficiency and productivity. And with policymakers in the European Union set to roll out open banking solutions to upgrade tax collection and fraud prevention measures, digital invoicing is an area of promising growth.
With endless possibilities, there is no time to lose. As consumers and businesses adapt to a new era of financial literacy, disruption is the new normal.
This means that merchants who do not yet offer a range of payment options both online and in-store are set to fall behind. Now more than ever, businesses simply cannot afford to lose customers to shopping basket abandonment and slow payments processes, and to do so they must ensure their payment processes don’t put additional barriers in the way of their customers.
Yet, many are still lagging behind in adopting the benefits of open banking technology, despite the growth of the sector.
Faster payments turn first-time buyers into regular customers
It is clear that tolerance for problems at checkout is hitting new lows. Recent research shows 78% of consumers are not completing online payments if they are required to enter additional information at checkout. Merchants need a solution, and this is where open banking comes in – with no additional information required to complete transactions, users can complete a purchase by simply selecting their bank and authorising the payment using biometric authentication.
What’s more, none of this requires third-party payment processing, meaning open banking is a totally seamless experience. So, with payments friction soon to be a relic of the past, automated payments will play a huge role in building loyalty and helping to drive conversion of first-time customers into well-known friendly faces – it’s a win-win for businesses.
Offering reliability and security will drive customer loyalty
Consumers want to protect their finances now more than ever, and this is pressing fast-forward on the growth of open banking. Our research found nearly half (48%) highlight the importance of checking whether a service is verified by a payment or bank regulator while an additional 51% of consumers express some concerns and reluctance to use a payment method from an unknown brand or provider.
Payments solutions powered by open banking can help relieve these concerns, by giving consumers full control over how their financial data is used and who can access it. As well as this, consumers also get the peace of mind that their payment solutions are powered by an established and reputable brand, giving consumers the reassurance and confidence they need to use it again and again.
The fact that every open banking payment is bank authenticated only reinforces this, as third-party providers don’t store sensitive personal information or passwords. From a business perspective, compliance to strong customer authentication (SCA) requirements are built into the product, meaning it’s one less thing for businesses to worry about.
Open banking is already changing the game for consumers and businesses alike, and it’s not going to stop. Businesses have what they need to satisfy growing demand for a faster, frictionless checkout experience – it’s now a question of when they will take advantage of them.