Interview with TrueLayer about PayDirect, the new Open Banking-based payment solution

What is TrueLayer’s story and how would you best describe the company’s business model and services? What are your target segments?

Our vision is to create a financial ecosystem that’s open to everyone by building intelligent infrastructure that puts fintech at people's fingertips. We empower anyone to create smarter financial services while removing friction and cost for our clients.

We work with companies across different sectors – from banking and fintech to payments and ecommerce, and from startups to enterprises. We enable businesses to seamlessly integrate financial data, payments, and banking services into their product offering. 

We’ve built a network on Open Banking rails across the UK and Europe and on top of that, we’ve built deeper solutions which solve more complex problems for clients, including our newest payment solution, PayDirect. 

In recent news, TrueLayer launched a new payment method offering, PayDirect. Could you expand on its capabilities? What makes it different from card payments and what benefits are to be drawn by your target industries?

Built on top of Open Banking and instant bank payment rails, PayDirect allows businesses to register customers in seconds, enabling those customers to deposit and withdraw money seamlessly, while also accelerating AML and KYC processes.

PayDirect sets a new standard for online payments. We’re already displacing cards in customer checkouts, for example with our customer Trading 212 – and this will accelerate mass market adoption. We really believe it will be the default way to pay online within a few years.

There are several reasons why. Firstly, it’s high converting (95%+ success rates; and 20% higher overall conversion than cards), which equates to millions or even hundreds of millions in revenue for businesses by the end of the year. The conversion differential between PayDirect and cards is likely to get even bigger this year as many merchants implement workarounds for card payments in order to comply with Strong Customer Authentication (SCA) requirements. Some studies suggest these might negatively impact conversion by 20-30%. PayDirect is already compliant with SCA because it uses biometric authentication.

Secondly, PayDirect is very low fraud. While fraud losses on card payments continue to hurt businesses, PayDirect payments are authenticated directly with the bank, and biometrically with the payer, significantly reducing fraud risk and saving businesses circa 0.5- 1% of revenues. 

Since PayDirect uses the fastest and most direct payment rails (e.g. Faster Payments in the UK and SCT Inst. in the Eurozone), payments also settle more quickly than cards. While card deposits can take up to 3 days to settle and withdrawals up to 5, PayDirect provides instant pay in and pay out capabilities.

Regarding PayDirect's reach, to which markets is it available and do you plan to expand it further?

PayDirect is available in the UK now and will be rolling out to Europe in the next few months of 2021.

When it comes to comparing PayDirect to cards, what are the pros and cons from a consumer perspective? (e.g. buyer protection/chargeback, instant refund)

We typically see that 1 in 3 customers chooses the Open Banking payment option after trying it once. 

There are several reasons why it makes sense for customers. For one, they don’t need to remember card details. Instead, they authenticate with their face or fingerprint on their mobile device, instantly and securely. Plus, they’ll never need to update stored details if their card is lost, stolen, or expired.

There’s also more protection for buyers who pay with PayDirect. They’re less likely to be the victim of fraud, since PayDirect uses bank-grade security. 

We also find that speed is a big issue for consumers. In many industries, slow payments are a long-standing source of frustration, complaints, bad reviews – and ultimately customer churn. A recent study from YouGov and TrueLayer (2020), found that 60% of customers are more likely to trust a provider that offers instant payments – and in the case of services like online trading, investment, and gaming platforms, around half of customers are likely to switch to a provider that offers them instant withdrawals. Unlike cards, PayDirect provides both instant pay-in and instant payout.

In terms of cons, there are always challenges in introducing a new payment method that customers aren’t used to. But because the payment experience is so seamless for customers with PayDirect, once we’re over that initial barrier, adoption increases rapidly.

How does TrueLayer differentiate from other bank-to-bank payment solutions/providers?

Unlike other bank payment providers, we’re API-first. With PayDirect, no passwords are stored and consumers only share their credentials with their bank, making it much more secure than methods like screen-scraping.

Ultimately, we think enabling consumers to pay with their fingerprint, from their banking app, will increase customer trust and conversion.

Unlike other solutions on the market, vendors can completely customise PayDirect with their brand, owning the customer journey end to end. Customers will also see the merchant’s name on their bank statements. This helps to build trust and ultimately increase conversion as the payment experience is less fragmented.

What is the future of account-to-account payments?

We’ve already seen the success of bank-owned payment schemes in Europe which have become the payment of choice for millions of consumers – in the Netherlands, for example, where iDeal dominates ecommerce, as well as in Sweden with Swish and Denmark with Mobile Pay.

Our data suggests that the UK is going the same way. Buy-now-pay-later brands like Klarna have shown there is a better way to do credit payments online and have quickly reached mass adoption in Europe. Now it’s time to fundamentally change the way we make debit payments online – from cards to instant bank payments, powered by Open Banking.

Across 2020, we saw the use of our payments API grow rapidly, as more consumers embraced instant bank payments and more clients implemented these capabilities, including Revolut, Trading 212, Freetrade, Nutmeg, and LeoVegas. 

In the coming years, we will see instant bank payments brought to the masses through sectors such as subscriptions, marketplaces, and ecommerce. We really believe it will be the default way to pay online within a few years.

Open Banking is also enabling the convergence of identity and payments. We’ve shown this with PayDirect. We believe all online payments are heading in this direction.

Finally, what are TrueLayer’s future plans? Do you see new financial products and further expansion on the company`s roadmap for 2021?

Over the next 18 months, we’re building out our global network, focusing on expanding in Europe, the US and Australia while adding solutions on top of Open Banking APIs that solve more complex problems for our clients.

We’ll also be building out our partner ecosystem across Europe to give our clients access to richer datasets. 

About Ossama Soliman

Ossama Soliman is Chief Product Officer at TrueLayer, the leading technology company building financial infrastructure that’s open to any business, anywhere in the world. A software engineer by background, Ossama has led product and strategy for American Express, where he deployed one of the company’s first large-scale machine learning programmes and was a product leader in Amex’s digital bank. He was most recently the General Manager of Business Lending at Amazon, where he built the business from scratch and launched machine learning powered products serving millions of customers globally.

About TrueLayer

TrueLayer provides global financial connectivity through open APIs. Our platform empowers engineers, innovators and enterprises in every industry to create smarter financial services. Founded in 2016, TrueLayer is connected to major banks globally, backed by leading venture capital including Tencent, Temasek, Northzone, Anthemis, Mouro Capital and Connect Ventures, and trusted by some of the biggest names in fintech including Revolut, Portify, Trading 212, and Zopa.