Traditional payment methods like credit cards and digital wallets are often costly and inefficient for merchants and consumers. These fees quickly eat into margins, especially for merchants with high transaction volumes or low-margin products. In addition, chargebacks and fraudulent transactions create further operational burdens, often requiring additional resources to manage disputes and recover funds.
For consumers, especially in regions like Eastern Europe, credit card ownership remains low, with only 37% of adults owning one. This limits access to credit-based payments, making bank-based alternatives more attractive. Instant bank payments provide a more secure and cost-effective alternative by cutting out intermediaries and enabling consumers to pay directly from their bank accounts. However, the European Open Banking landscape is highly fragmented, with over 5,000 banks and 24 different payment rails, leading to varying coverage and conversion rates between providers.
At Ivy, we’ve built a network of networks to address this. We identify, contract, and integrate top-tier connectivity providers for every bank into a single API. This significantly improves coverage and conversion rates across markets. Our Smart Routing Engine further improves this by selecting the most reliable provider out of our network for each transaction, ensuring higher conversion and success rates.
Our recurring payments product enables merchants to reduce recurring payment costs. One of the key challenges we’ve consistently heard from merchants is payment failure due to manual errors, insufficient funds, or IBAN fraud, which can lead to higher chargeback rates and lost revenue. To address this, we leveraged Open Banking to automate the setup of direct debit mandates for subscription payments and one-click payments. Open Banking with SEPA Direct Debit verifies accounts before creating mandates. It also means that users do not have to manually type their IBAN, improving user experience and eliminating the risk of false data entry.
To further enhance recurring payment automation, we introduced smart retries, which automatically reattempts debits when sufficient funds become available after an initial failure. This simplifies the management of recurring payments and mandates and significantly reduces the likelihood of payment failure, ensuring a more seamless payment experience for merchants and their customers.
In regions with low credit card penetration, such as Eastern Europe (where only about a third of adults own a credit card), Open Banking provides an excellent alternative, enabling users to make payments without friction. Additionally, with SOFORT merging into Klarna’s Pay Now offering, which will soon require users to create a Klarna account, and Giropay/Paydirekt being phased out, Open Banking offers a trusted and streamlined way for users to continue making bank payments seamlessly.
However, as banks control part of the user experience, merchants sometimes express concerns about friction in individual bank flows, especially since not all banks support one-click or biometric authentication. While this is true, the critical component is that consumers use their trusted banking app, which provides a familiar experience – even for first-time users – reducing perceived friction.
At Ivy, user experience and adoption are critical focus areas. The most trusted financial institution in 2024 remains the house bank, so we offer Ivy as a fully white-labelled solution with bank co-branding, displaying bank logos at the checkout instead of Ivy’s brand.
Moreover, we’ve launched the ‘Remember me’ feature, which improves repeat payments by tokenizing bank accounts, allowing consumers to access their saved payment details across devices, merchants, and markets. This streamlines repeat payments, boosting user experience and conversion rates.
We expect 63.8 million European users to adopt Open Banking in 2024. While Europe has led the way with PSD2, the upcoming PSD3 will further upgrade the ecosystem by standardising processes and tightening security. Open Banking has already become a global phenomenon, with over 70 geographies rolling out local Open Banking infrastructures.
At Ivy, we believe that seamless payments will soon be the baseline expectation for merchants and consumers. With all European banks required to implement SEPA Instant payments in 2025, the speed and efficiency of transactions will increase dramatically. Additionally, the growing demand for multi-currency payments and real-time cross-border transactions will continue to grow as businesses expand globally. We’re developing solutions to meet these needs, helping companies scale internationally without the complexities of fragmented payment systems.
As Open Banking reshapes the payments landscape, we’re leading the charge. We’re consistently innovating to ensure our solutions meet the evolving demands of merchants and consumers. Open Banking is the future of payments, and Ivy is here to help merchants thrive in this new landscape.
This editorial piece was first published in The Paypers' Open Finance Report 2024, the latest comprehensive market overview and analysis focusing on the key players and products within the Open Banking and Open Finance ecosystem. Download the full report to discover more insightful content.
Ferdinand Dabitz is the CEO and co-founder of Ivy, a global API platform for instant bank payments, backed by investors like Valar Ventures and Creandum. With experience at McKinsey & Company and the Max Planck Institute for Innovation and Competition, Ferdinand brings a fresh perspective to the payments industry. Under his leadership, Ivy transforms global payments by unifying instant bank payment rails and delivering seamless, innovative business solutions.
Ivy is a leading Open Banking provider, optimising Open Banking coverage and conversion rates for merchants. Ivy connects businesses to a network of over 5,000 banks by offering a single API integration. With a focus on enterprise clients, Ivy's solutions eliminate the need for credit cards, reduce payment failures, and improve user experience, positioning the company at the forefront of the global payment ecosystem.
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