Interview

Account to Account payments and their role in improving customer experience

Wednesday 30 September 2020 09:29 CET | Editor: Anda Kania | Interview

Ciaran O’Malley, Vice President of Partnerships at Trustly, reveals the trends around Account to Account payments and their role in improving the customer experience

Online Banking e-Payments are becoming increasingly more important throughout Europe, not just in Sweden or the Netherlands, but all over the continent Online Banking e-Payments have become a preferred payment option for many consumers. We asked Ciaran O’Malley from Trustly, who provide Online Banking e-Payments a.k.a. Account to Account payments, about the development of Online Banking e-Payments. 

What trends have added to the relevance of Account to Account payments in recent years? 

There are two underlying trends driving the growth of Account to Account payments: convenience, and customer interactions with banks. Convenience drives conversion, and a payment experience with Trustly is secure and only requires a single fingerprint. This boosts conversion on checkout and satisfies the need for a better debit payment solution. 

Moreover, customers are beginning to view banking as more than the bank or branch, as Neobanks and Personal Financial management apps are expanding how we interact with banks. Consumers are now familiar with using their bank account for other services, such as Trustly. Thus, every merchant we speak to today is considering a solution that offers Account to Account payments. 

There are staggering drop-off rates at the checkout page of online stores: last year a Baymard study showed that 7 out of 10 customers abandon the checkout process at the final step. How does Trustly ensure a smooth customer interface that yields higher conversion? 

Let’s dwell on abandonment: merchants invest so much to get a customer through the purchase process –advertising, promotions, UX optimisation, and a great product. Yet poor checkout conversion damages the return on all these investments. If we compare the experience of paying with Trustly with cards there are 2 stand-out areas: new customer conversion, and frequent repeat customers. 

With cards, I need to enter my 16 digits, security pin, expiry, and perhaps an additional billing address. I need to do this for every merchant. Then I may need to enter a SMS OTP or fingerprint to confirm the payment. Whereas if I have used Trustly before with any merchant, I simply select my account and fingerprint to confirm. This avoids manual entry, which is crucial to achieve high conversion for mobile payments.

Furthermore, if customers need to update their card details, they may well just abandon. With Trustly, your bank account doesn’t expire, so you will always be able to make that payment. 

Finally, it is also important to consider the impact of refunds on checkout conversion. Our research shows 65% of customers actively consider the refund experience when choosing where to buy. Therefore, with Trustly instant refunds, merchants can satisfy the customer’s need and increase conversion, without affecting their cash flow. 

With PSD2 and Open Banking in place, larger merchants and PSPs could potentially opt to develop their own Account to Account payment. Can you walk us through the considerations of buying versus making your own solution? 

This is a dilemma faced by many merchants and PSPs. The logic is seemingly sound: you build a direct integration to the APIs once and you have very low-cost payments. Unfortunately, there is quite a lot more to offering a great Account to Account solution. 

There are 3 areas of additional investment: 

  1. full bank coverage and maintenance; 
  2. backend processes; 
  3. payments risk. 

Firstly, many European banks will require integrations via the Modified Customer Interface (MCI), which are significantly more costly and require frequent maintenance. If you don’t offer all the bank options, you will have lower conversion rates. 
Besides, you have to resource a maintenance team to keep up to date with banks’ changing APIs or MCI to ensure reliable payments. 

Moving on to backend processes, it is important to note that bank APIs alone are not a full payments solution like cards. They only allow you to initiate a payment, what happens after initiation is outside of their domain. Two primary backend areas merchants should consider are refunds and reconciliation. 

In order to facilitate refunds, you need to build your own automated system to collect the bank account number and make a refund payment. Regarding reconciliation, bank payments don’t have a simple settlement process and reconciliation like cards. This means that settlement times can be faster than cards, but the high amount of variation between banks can cause issues. You need to build an integration into your own corporate accounts –which frequently don’t have an API – to be able to reconcile the payments and then maintain these. 

Finally, bank payments aren’t guaranteed, so you need to build a system to manage the risk of an initiated payment not settling. Unfortunately, there is no way to know which types of payments or banks will have this risk until it happens. Merchants need to build up an understanding based on real losses, which may not be palatable. Furthermore, these lost payments cause reconciliation problems and expose merchants to active customer fraud. 

Solving these questions is critical to extracting the benefits of Account to Account services. It requires specialist expertise, upfront investment, and maintenance beyond integrating the bank APIs.

This article was published in our Payment Methods Report 2020, an extensive overview of what’s new in how people pay in the most relevant ecommerce markets.

About Ciaran O’Malley

Ciaran is the Vice President of Partnerships, having joined Trustly as Head of Commercial Strategy in 2016. His team is responsible for Trustly's relationships with Payment Services Provides, Platforms and other technical integrators. Alongside this, he has been involved in Open Banking in the UK and other industry initiatives such as SWIFT’s Pay Later API standard. Prior to Trustly, Ciaran worked in investment banking – firstly, at Credit Suisse as a Derivative Quant working on the implementation of CRD IV, and laterally in Financial Institutions Mergers & Acquisitions at SocGen and Nomura.

About Trustly

Trustly is a Swedish fintech company that makes online bank payments fast, simple, and secure. Today, it covers 29 European countries and the US. Trustly’s payment solutions attract global merchants in ecommerce, travel, financial services, and more.


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Categories: Payments & Commerce | Payments General
Countries: World
This article is part of category

Payments & Commerce