Voice of the Industry

Could Open Banking revolutionise the hospitality industry?

Thursday 26 May 2022 08:26 CET | Editor: Vlad Macovei | Voice of the industry

Richard Carter, CEO and co-founder of OrderPay, tells us the benefits and customer incentives Open Banking could bring to the hospitality industry

Outside of fintech circles, Open Banking can be a hard sell. The word ‘open’ next to the word ‘banking’ is a little daunting to some, and to be blunt, most people just have no idea what it is. 

Therefore, it’s important to speak about Open Banking in terms of benefits. And when we’re speaking of the hospitality sector, those benefits could be huge. I speak to hospitality business owners on a daily basis, and I find that many are confused by their payment fees and are not aware of Open Banking. But when I explain that they’re probably paying too much for every transaction, they’re very willing to explore alternatives. 

Some hospitality experts are already excited by the prospect of Open Banking. Strahan Wilson, CFO of State of Play Hospitality told me that ‘consumer Open Banking payments represent a fantastic opportunity to deliver material operational savings for the sector.’ 

Brandon Stephens, the Founder of Tortilla, another forward-thinking hospitality business, agreed. He commented that ‘the opportunity to embrace the accelerated digital adoption and cut payment terminal fees in half with Open Banking is very exciting indeed.’

Up until recently, the payment terminal has been a firm fixture within hospitality, and a costly one at that. In fact, most operators don’t know just how costly. If you ask businesses how much they pay per transaction, most will give you the headline transaction fee given by their provider, which can be as low as 0.3%. But once you get into the small print, the interchange fees, the monthly charges, and ad hoc costs, the figure is often closer to 0.6%. Paying twice as much as expected can lead to unexpectedly high monthly invoices, and when added up could be costing the industry millions each year.

The way customers pay is shifting – the QR code is signalling the end of the traditional card reader - but the potential for providers to take a hefty percentage of each transaction remains. This is where Open Banking comes in – there’s huge potential to build upon the tech that customers are now used to, but reduce the cost to the venue by changing the payment process behind the scenes.

Previously reluctant to implement too much technology, the hospitality sector is starting to reap the rewards of the semi-enforced introduction of QR codes and other tools during the pandemic – concerns about losing tips and replacing that personal touch have now been largely put aside, with businesses who embraced the technology finding that tech has led to more tips, higher spend, and more efficient operations. Hopefully, industry leaders can foresee the gains to be made from implementing Open Banking and push for change.

Hospitality has a unique opportunity to benefit by introducing Open Banking as the customer is already on a committed path, unlike online retail where at checkout they’re presented with half a dozen options and can still walk away. Alongside traditional cash and card, if a restaurant were to offer payment by Open Banking and take even a small percentage of business through it, they would immediately see a difference in their bottom line. Open Banking enables operators to maintain the same service and security during the payment process but breaks them free from the additional fees for authorisation, PCI non-compliance, corporate, and credit card charges.

To change the way customers pay will of course be a challenge. Consumers won’t change their habits without an incentive, but Open Banking allows hospitality venues to reward their customers for making a small change that could save them thousands each year. For example, guests would likely switch to a different payment method if they were given an immediate discount. And in return, the venue gets insightful data on top of saving on transaction fees. This data can in turn be used to present guests with personalised offers based on their spending habits, continuing the cycle of benefits to both customer and business owner.

In fact, this is a trend we’ve recently seen when researching for our upcoming white paper, with 45% of respondents stating they’d be willing to share more personal data to receive bespoke offers and suggestions which were tailored to them.

Looking ahead, the adoption of Open Banking in hospitality will hopefully lead to 3 things: firstly, this could save the sector millions in hefty payment fees. Secondly, it could put an end to the murky world of hidden fees and charges. And finally, it will help venues understand their customers even more, leading to a more personalised experience for guests at a much lower cost to businesses. I’m open to that.

About Richard Carter

Richard has over 15 years experience in CRM, loyalty and business development. Richard started his career at Accenture, before running Shell’s Loyalty Programme in Central & Eastern Europe, and then becoming part of the founding team at receipt marketing scale-up, Ecrebo.

About OrderPay

OrderPay take orders and payments, wherever and whenever venues and customers want. Every base is covered – from a slick app to a web-based Pay Only solution. With tipping, tabs, bill splitting, gifting, and analytics offered as standard, OrderPay is the UK’s fastest, most flexible and most cost-effective Order and Pay solution.

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Keywords: Open Banking, QR code, Open Banking payments
Categories: Banking & Fintech
Companies: OrderPay
Countries: United Kingdom
This article is part of category

Banking & Fintech


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