Voice of the Industry

Account-based Payments – The new convenient, secure and fast way of payment

Monday 1 March 2021 08:56 CET | Editor: Mirela Ciobanu | Voice of the industry

equensWorldline payment experts believe PSD2 strongly supports a new convenient, secure, fast, and cheap account-to-account payment method based on API-based Payment Initiation Service

To successfully close purchase transactions, merchants are always exploring new ways to make the customer journey more seamless. Convenience is one of the key aspects of customer experience, and the consumer now expects a frictionless sales process across all channels, regardless of the purchase phase (pre-sale or post-sale phase).

In recent years, a variety of new payment methods, in particular mobile payment methods, have been introduced in various markets. The main reason for adoption was indeed the ease-of-use of such methods, available on familiar devices and at one’s fingertips. Thus, payments appear to become an important convenience factor in the shopping process and offering the right payment method in the sales process becomes an important success factor for any merchant.

The main goal for merchants is to improve their conversion rate and ultimately increase their sales figures. While they must comply with the new standards for customer experience, they are also forced to increase their productivity and fine-tune their costs to ensure their competitiveness. Flexible and reliable payment systems can again prove to be effective, enabling faster payment settlements and improved cash-flow management.

Recently, account-based payments have been successfully introduced to the European market. As one result of the second edition of the Payment Service Directive, now all banks have to offer an API-based interface to enable licensed third-party providers to initiate account-to-account payments via SEPA credit transfer (or even SCT Inst) in a regulated and secure way. Business cases are flourishing now.

How can this new payment method solve the consumer and merchant requirements? 

The user experience is nowadays mainly driven by the usage of the mobile device for initiating and securing the payments. Through the smartphone, the merchant can also offer additional benefits to the consumer like product-related information or loyalty.

The consumer can almost have the same payment experience in the online and in-store scenario.

Looking at the merchant’s needs, new account-based payment methods lead to a considerable reduction in cost thanks to the absence of classical scheme involved (no scheme fees). Together with the introduced instant payment functionality, the settlement is getting faster and no additional payment guarantees have to be provided.


How will consumers experience account-based payments?

In the ecommerce scenario, the consumer would first select his bank and the related account (in many cases this would be part of the registration process). He would then be asked to authenticate himself via the Strong Customer Authentication (SCA) provided by his bank. Afterwards, he would receive the payment confirmation.

For in-store payments, the merchant needs to transfer the payment details to the mobile device of the shopper. This can be either done to ask him to scan a QR code or using NFC at the payment terminal or the cashier system. The consumer has the same experience as in the online case. According to PSD2, the user experience will even be improved in certain situations as some SCA exemptions will apply e.g. for low value payments, trusted seller or recurring payments.

Example of the User Experience with in-store Account-based Payments

How will be the introduction of account-based payment to the market?

Account-based payments are not new in all regions of Europe, as payment methods like iDEAL in the Netherlands and Swish in Sweden are already successful for some years now. The experiences from these countries show that the key to success is always the consumer acceptance. In Sweden, the payment scheme started with Person-to-Person payments and extended the scope later to Business-to-Consumer. In the Netherlands, the success of the iDEAL scheme is based on a large joint marketing effort by all participating banks.

Looking at the characteristics of account-based payments in combination with Instant Payments and supporting functionalities like Request-to-Pay, we predicted market penetration over the next five years up to 10% of all payments.

What benefits brings account-based payment compared to traditional payment methods?

If you compare account-based payments with card payments, the consumer can take advantage of the user experience using the mobile phone, the security aspects and the possibility to pay higher amounts. The merchants can eliminate the interchange and scheme fees and have the funds available early. Compared with SEPA direct debit, the consumer does not need to sign any mandate and keeps the full control over the payment initiation. Merchants will benefit from the irrevocability of the payment transaction.

About equensWorldline

equensWorldline is the pan-European leader in payments and transactional services. Being part of the Worldline Group, we combine long-standing proven expertise in traditional mass payment systems (issuing, acquiring, intra- and interbank payment processing) and innovative ecommerce and mobile payment solutions. As expert partner we enable numerous clients across Europe to cater for the shifting needs and increasing demands of their customers.

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Keywords: SCA, PSD2, payment processing, API, account-to-account payment, merchants, equensWorldline
Categories: Payments & Commerce
Countries: World
This article is part of category

Payments & Commerce