Interview

Why Open Banking payments are the future of payments

Monday 31 January 2022 09:11 CET | Editor: Vlad Macovei | Interview

Plaid’s Head of Product in Europe, Albert Malikov shares how Open Banking revolutionises payments, with large merchants starting to explore the alternative to traditional payment instruments

This interview was originally published inside the Open Banking Report 2021. To download the report, please click here.

How do you see Open Banking playing out in Europe, specifically in terms of adoption and product innovation? 

Consumers across the EU are responding to new payment options like PIS - our volume is seeing month-on-month growth. We think it’s due to a few reasons:

  • Keeping the end-user in the driver's seat - payments can only occur when the user consents to a connection and authorises a payment transaction;
  • An integrated offering, offering a one-stop experience - users can initiate payments from within their ecommerce environment, with flows automatically redirecting users to where they need to be to authorise and effect the payment instruction;
  • Merchant wins - PIS allows a seamless payment experience that’s embedded within the merchant's environment, which leads to fewer drop-offs… and more sales. It’s important to mention though that this is where banks and PISPs need to work together. If banks add too many screens or superfluous clicks in what’s called their part of the payment flow, known as the ‘step-out’ component in a PIS transaction - drop-offs will still occur. 

Could you provide a key example of Open Banking payments application?

Paysend is now working with Plaid to provide their 3.4 million customers with simple Open Banking payments that enable fast, low-cost international money transfers. Rather than typing out card numbers or doing manual bank transfers, Paysend has enabled a smooth ‘click, confirm, and carry on’ experience using Plaid’s Open Banking platform. As a result, Plaid’s instant payment initiation service results in an 80% reduction in the time and clicks it takes to authorise a transfer.  

In your opinion, what are consumers and merchants’ attitudes to Open Banking? Are they willing to use Open Banking solutions? 

Open Banking is growing at an exciting rate. According to Open Banking Limited, the number of API calls in the UK increased from 66.8 million in 2018 to almost 5.8 billion in 2020. Cumulatively, API call volumes reached over 7 billion between 2018 and 2020. 320,000 Open Banking payments were made in 2018, this has subsequently risen to over 4 million in 2020. 

New research from Plaid, an Open Finance network and payments platform, and The Harris Poll, reveals that fintech use and adoption has reached mass scale in the UK, with an 86% consumer adoption rate.

From the use of QR codes to digital banking, the COVID-19 pandemic has accelerated consumer adoption of fintech, particularly in the realm of payments. The Fintech Effect, Plaid’s 2021 annual report, found that UK consumers on average use 2.8 fintech products and services, with the average UK user managing 67% of their finances online. When asked, current users expect to increase the number of apps and services they use to 3.5 over the next six months, signalling digital finance adoption will continue to grow. 

In addition, Plaid’s report found that consumers find utility in Open Banking and it has made a positive impact on their financial lives; 76% of Brits now feel confident using technology to manage their finances. In addition, UK consumers reported that using fintech had helped them benefit by saving time (59%) and money (42%), as well as greater stress reduction (36%). 

What is the future of the Open Banking payments industry in the UK and Europe? And what are Plaid’s plans for 2021 and beyond?

The Open Banking payments revolution is just beginning to take shape: we expect that adoption will continue growing, penetrating new segments. Since 2020, we’ve seen interest in Open Banking payments coming mostly from more innovative and nimble fintech players. Now, many large merchants have begun to explore the alternative to traditional payment instruments. The adoption won’t happen overnight, but the trend is there.  

Plaid is currently live in North America and eight countries in Europe, with many more to come. We are not only adding new countries to our coverage but also investing in deepening bank coverage in each of the markets we already operate in.

From a payments capabilities perspective, we are helping our customers to get out of the box solutions for Open Banking payments, including pay-ins and KYC. We’re continuously improving our products and building out new features that help our customers better serve their end-users.

Plaid is also playing a leading role in bringing to the market Variable Recurring Payments.  Variable Recurring Payments (VRPs) allow customers to safely connect authorised payments providers (PISPs) to their bank account so they can make payments on the customer’s behalf. VRPs offer more control and transparency than existing alternatives such as direct debits and card payments. As a result, VRPs are poised to create a huge new wave of payment innovation that challenges traditional card on file and Direct Debit solutions and enables new types of financial services for consumers. 

This interview was originally published inside the Open Banking Report 2021. To download the report, please click here.

About Albert Malikov

Albert Malikov is Head of Europe Product at Plaid where he leads strategy and development for Plaid's products in the UK and Europe. He joined Plaid from Uber where he led the development of products at Uber Money. Before Uber, Albert co-founded InShopper. Albert holds an MBA from MIT. 

 

About Plaid

Plaid is a global Open Banking platform. We use our global network and local expertise, so your customers can see their financial data and make payments from your app. We have a single API. But we don’t believe in one-size-fits-all. We bring together the technology so you can create the payments journey your business needs.


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Keywords: Plaid , Open Banking, account-to-account payment
Categories: Banking & Fintech
Companies:
Countries: Europe
This article is part of category

Banking & Fintech