'Open Banking payment solutions are built for the digital, mobile-enabled world, making them an excellent solution for modern shopping.'
Open Banking payment solutions are built for the digital, mobile-enabled world, making them an excellent solution for modern shopping. There are significant benefits for both merchants and their consumers when using Open Banking enabled payment solutions.
1. Secure
Open Banking solutions have contributed to a shift from a closed data model to an open one, where sharing data between various players in the financial ecosystem is possible through customer authorisation.
Open Banking payments are more secure because authorisations are done with bank-level security technology, through biometric authentication, without credential sharing. There is no need for card or account details to be manually entered when making payments and all parties are securely authenticated, significantly reducing the risk of fraud and even ‘fat finger errors’.
2. Cost effective
Because there are no card networks involved in processing transactions, interchange fees are eliminated, which reduces the cost of acceptance for the merchant (or payee). Automated reconciliation is also possible, meaning businesses can further save money by freeing up resources.
3. Fast
With Open Banking payments, funds settle instantly or in the same day, compared to 1-3 working days when transactions are processed by card. Non-sensitive data (such as customer reference numbers) can also travel with an Open Banking payment and these fields are often automated, which can eliminate human error and, eventually, speed up reconciliation.
4. Seamless
Seamless payments are possible through Open Banking because no data entry is required from the payer. The payment can be actioned in seconds, depending on the bank’s authentication process. Biometrics also come in handy here, meaning the payment can effectively be authenticated, reviewed, and authorised in just a few taps.
By bypassing card network limitations, Open Banking payments also have higher transaction limits (once KYC checks have been set up) and benefit from higher conversion. Because they’re digitally optimised, on average, Open Banking payments convert up to 40% better than cards.
Aggregating an individual’s financial data under one application gives the consumer full visibility and control of their financial data. This has made it easier for the consumer to make informed, beneficial decisions regarding financial products and services.
With more control over data comes a heightened awareness and understanding of it, meaning that the security and privacy of said data are now at the forefront of customers’ minds. Today, consumers expect their payments to be frictionless, fast, secure, and mobile-enabled – and Open Banking has contributed to this perception shift.
A2A payments have been around for decades; think push payments where users can transfer money from their own accounts by using the account details of a recipient (be that another individual or a business). Direct debits or subscription payments are also a type of account-to-account payment, sometimes also referred to as a pull payment because the merchant or service provider typically pulls or withdraws funds from a consumer’s account.
A2A payments traditionally run on legacy bank rails, built before the digital age. And, while they were cheaper, they involved significant manual work, the UX was often lacking, and they were difficult to scale across borders.
A2A payments powered by Open Banking are no longer restricted to the banks’ own technology but can be seamlessly embedded in the apps that consumers already use, with a greater focus on conversion and user experience. Moreover, they can be used by anyone with a bank account and that they’re lower in cost.
Both Account Information Services – accessing online information from payment accounts – and Payment Initiation Services – initiating transfers from payment accounts – must be provided to regulated third-party providers at the same level of service offered to customers directly. This positively impacts the cost and speed of execution of Open Banking payments, further differentiating them from traditional A2A.
Prominent regions where Open Banking has gained momentum include Western European countries and the UK, aided by regulatory changes, namely PSD2 and GDPR coming into force in the past few years. The Asia Pacific payment landscape is largely influenced by mobile, so we have seen adoption start to take shape there as well. The US has been slower to adopt Open Banking enabled payments but the number of use cases is at an all-time high.
Making sure that the integration of modern payment methods into a business’ payment strategy is seamless, fast, and secure, much like the transactions themselves, is how we are bringing payments into the future. We believe payments should accelerate a merchant’s business and drive growth.
We enable merchants to offer Open Banking payment solutions to their customers easily via one integration into the Nuvei platform. We offer connectivity to multiple Open Banking providers to ensure the best possible banking and country coverage.
This interview was first published in Payment Methods Report 2022, the most updated overview of trends and developments in the payment methods space and the innovative technologies that these methods work upon, emerging consumers habits, and strategies on how to win at conversion and retention.
As SVP, ACH & Online Banking, Tim leads Nuvei’s efforts to deploy pay-in and pay-out capabilities which leverage the company’s Open Banking platform. He is a seasoned payments professional with 30+ years’ experience leading large sales and operations organizations, in various executive positions. Tim spent a large part of his career working for Bank of America and TSYS in the United States, during which he had responsibilities managing international operations in Europe and Asia. Mr. Munto holds a Bachelor of Science degree from Wright State University and master's in business administration from the University of Dayton.
Nuvei (Nasdaq: NVEI) (TSX: NVEI) is tomorrow’s payment platform. Designed to accelerate customers’ business, Nuvei’s modular, flexible and scalable technology allows leading companies to accept next-gen payments, offer all payout options and benefit from card issuing, banking, risk and fraud management services. Connecting businesses to their customers in more than 200+ markets, with local acquiring in 45+ markets, 150 currencies and more than 550 alternative payment methods, including cryptocurrencies, Nuvei provides the technology and insights for customers and partners to succeed locally and globally with one integration.
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