Although APIs that are used to facilitate payment initiation were introduced several years ago, they are still not widespread everywhere (in France for example). Therefore, the idea of payment initiation, which relies on open banking, might offer many advantages to certain geographies.
Apart from bank transfers, the French had very few automated payment solutions capable of accessing their bank accounts to send money to an e-merchant. That was until the concept of ‘payment initiation’ was created. Despite its geek-jargon name, this is a solution that is simple to use, fast, and highly secure. While allowing customers to remain logged on to the online sales site, payment initiation redirects them directly to their banking environment to authenticate themselves and initiate a money transfer from their account to the merchant's.
Benefits for both sellers and buyers
Credit or debit card payment amounts are often capped, hence blocking pricey purchases, particularly when it comes to B2B operations. Besides, performing a bank transfer involves a long procedure of adding a new recipient, entering their IBAN (or RIB in France), with the added risk of data entry errors, and finally waiting for the bank's authorisation.
In contrast, payment initiation is much more flexible since the user is accompanied throughout the application. Having fewer intermediaries means fewer barriers, thereby reducing the failure rate of transactions. Similarly, a transaction cannot be contested because the buyer is the only one to initiate the transfer. Hence, there can be no dispute with – or possible recourse against – the merchant site.
Moreover, payment initiation is tailored for all generations, as it is fit for digital-first consumers but also for those that are unfamiliar with new technologies. From the buyer’s perspective, payment initiation offers a more secure alternative than the credit or debit card, which requires entering information – including the primary account number (PAN) and the visual cryptogram, increasing the risk of a security breach by a hacker. This issue has regularly made the headlines. For instance, regarding the European space, in May 2020, the airline EasyJet announced that 9 million of its customers were victims of a highly sophisticated attack: the credit card details of 2,208 customers were hacked (source: ZDNet). In the US, on the other hand, credit card fraud statistics show that the misuse of payment cards is a major problem. Allegedly, for every USD 100 spent with a credit card, USD 6.97 are stolen. Consequently, USD 24.2 billion were reportedly lost in 2018 (source: SpendMeNot).
With payment initiation, there is no need to leave the store – the bank comes to the customer
How about the customer journey? Once on the website, the buyer chooses an item and then the payment method. By opting for payment initiation, the customer then selects the bank that allows them to access the payment information. Everything is already filled in – a time-saver with no security risk due to the strong authentication required to access the banking space.
Furthermore, in the B2B sector, where bank transfers are still commonly used for high-value baskets, payment initiation seems to be a fast and reliable alternative. Besides, user feedback has increasingly shown the benefit of adopting this technology, which has the added value of being less expensive for the merchant than accepting a business credit or debit card. In retail, we see a similar situation, as payment initiation has its advantages for various types of expensive purchases (e.g., travel-related).
Finally, payment initiation has come at an expedient time, adding to the whole gamut of available payment methods. Therefore, considering its many advantages for optimising the customer journey, payment initiation may become a preferred payment method for commercial transactions.
About Fabienne Pasquet
With a proactive record of service in the field, proven experience, play-to-win ethic, and professional vision, Fabienne Pasquet, as Head of Sales Europe at Limonetik, is responsible for building a sustainable commercial strategy to promote sales development in line with the company's ambitious projects. Before joining Limonetik, she held senior positions at Creditplace Services, La Française, or Rothschild (Private Banks & Asset Management Companies). She also created Fab Exclusive Selection, a Singapore-based wholesale trading company, and managed the business for three years. She holds a Master's in Applied Economics, specialising in financial markets, from the University of Paris Dauphine.
About Limonetik
Limonetik is a full-service payment aggregator that offers, via a unique API connection, acceptance of more than 285 international payment methods and advanced services – from collection and settlement management to reconciliation and account management – to enable new payment experiences (marketplaces, omnichannel model).
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