Yes, sure. First, we’re making a massive move to a cashless society and entering a new era of digital payments. But also, we are in the early stages of a shift away from credit and debit cards and towards other forms of digital payments, mainly e-wallets, which will, at some point, include account-to-account (A2A) payments These shifts are happening fast, aided, of course, by the pandemic. In fact, wallets comprised 48.6% of ecommerce transaction value globally in 2021 (USD 2.6 trillion), and are projected to rise to 52.5% of transaction value in 2025. APAC continues to set the pace, driven by Alipay and WeChat Pay.
A short primer about Open Banking payments for those new to the space: A2A payments enable the direct transfer of monies between accounts without relying on third-party intermediaries or payment cards. Payment rails are a type of network that enables the movement of funds between accounts. The key benefits of A2A/Open Banking payments are that they are real-time, cost significantly less, have no late fees, are less exposed to fraud since they need to be authenticated via a banking app, and are convenient. These benefits are fully consistent across different use cases, which could be for Merchants (B2B) or within the embedded finance app (Asset Management). How they can be applied in different scenarios is where things really get interesting.
The most obvious and valuable use case for A2A payments, that is ready right now, is for consumer-to-business payments with high volume, such as utility companies, telecoms, and insurance. There is a range of unique benefits to this, including that they are instant and irrevocable. Furthermore, as they can be paired with account information to know when to bill customers at the optimal time, these kinds of businesses can drastically lower collection costs. This is a powerful use case which will bring enormous savings to our customers.
A2A payments are also powerful for B2B and B2C apps, and we are working on some specific use cases around this.
The standard Open Banking payment flow is quite simple. It involves a customer entering their bank credentials to initiate a payment, and a TPP such as Yolt to connect the customer and the merchant.
But there is more complexity in some of the app-based payments we are seeing at the moment. With one partner we are enabling consumers to make purchases from merchants on their app wherever they’re located in Europe or the UK, using A2A payments instead of cards. This combination of mobile payments and Open Banking is a huge opportunity ahead of us.
In terms of Fintech investment, two areas – payments and crypto – are really leading the way, with over USD 13.4 billion invested in Q1 2022. And crypto and payments are also merging on single apps. A2A payments can be leveraged to manage your crypto assets, and also to help customers pay merchants with crypto. In fact, Open Banking payments are ideal for this use case because they are instant and irrevocable, which is especially important if you have to manage the crypto conversion for the merchant.
All merchants would like to decrease their transaction costs for all payments, including micropayments – which means moving away from the card schemes. But of course, this cannot come at the expense of conversion, security, or speed. As mentioned, Open Banking payments offer these advantages, but if you want to accept payments from across Europe and the UK, you will need to have a provider that is licensed for both.
François Gutierrez is the Chief Business Officer at Yolt. He has three decades of experience in the tech, SaaS, and banking industries, from global US-based companies to startups, holding international executive positions across EMEA and LATAM, including as Chief Revenue Officer of Credit Decisioning Open Banking startup Algoan, and a payment provider in the subscription economy, Slimpay.
Yolt is a provider of pan-European Open Banking APIs and solutions - building, managing, and maintaining AIS and PIS connections for top financial institutions and ambitious tech businesses. In January 2018, the company became the first Third-Party Provider to successfully make an Open Banking API call, and by 2020, it had made over one billion API calls. Yolt now offers API connections to 600+ banks across Europe.
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