How can consumers be persuaded to use Open Banking payments?

Much has been made of Open Banking payments’ impressive growth. They’re being seized on by businesses across the travel, retail, gaming, and crypto verticals – to name but four – but one very valid question remains: how can even more consumers be encouraged to use them?

For businesses, the benefits of Open Banking payments are easy to unpack. They’re fast. There are no interchange fees. They bypass card fraud. There aren’t chargebacks. For consumers, it’s not quite as straightforward – not because the benefits aren’t tangible, but because adoption is dependent on a behavioural shift.

Card payments are entrenched into most consumers’ everyday lives. Sure, there are encouraging exceptions with PIX in Brazil, iDEAL in the Netherlands, and SOFORT in Germany, but the fact remains that cards, for now, are the dominant payment method. In 2020, Visa – just one half of the card duopoly – processed approximately 188 billion transactions. That’s 25 for every person on Earth.

Sparking a shift in shopper preferences

Information alone won’t be enough to spark a wholesale shift to Open Banking payments. It’s true that they’re faster, easier, and safer than online card payments, that they facilitate real-time refunds, and that, generally speaking, they give consumers more freedom and control. We and others in the Open Banking space can continue explaining these benefits, and while they are resonating, we often come up against two key challenges.

First, people are used to cards. They feel – if you’ve never experienced an alternative – relatively convenient. You might have to occasionally rummage around your back pocket in search of your card’s CCV code, you will have to enter new details once your card inevitably expires, and you may feel uneasy about a merchant remembering your card details, but the average shopper still sees these as small prices to pay.

Second, where and how should the benefits of Open Banking payments be explained? At the checkout? These can be crowded places. As a result, shoppers look for familiarity – they have neither the time nor the inclination to be ‘sold’ a new payment method. Expensive advertising campaigns? Possibly. Celebrity endorsement? Maybe. What’s really needed is a meaningful incentive – one that’s delivered at the perfect moment, and which is too powerful to ignore.

Delivering a powerful incentive

Let’s explore a hypothetical example. Say you’re booking a city break on a well-known travel website. You’ve found your hotel and your flights, and you’re ready to pay for them using your credit card. You start entering the first few digits of your card number and, hey presto, a pop-up appears. It says that, if you switch to an Open Banking payment, you’ll earn x number of reward points that you can put towards your next trip. What would you do – stick or switch?

At Volt, we played through this scenario and decided to build a product – Transformer – around it. In essence, it recognises when a shopper uses a bank-issued credit or debit card from the first six to eight digits of their card number. The pop-up, which allows the merchant to create their own incentive (so they can benefit from the zero interchange fees and no chargebacks mentioned earlier), also contains a prominent call to action, which when selected takes you swiftly to your bank’s app or online banking to complete your payment.

When this happens, the shopper won’t just receive their reward – they’ll also be ‘sold’ on Open Banking payments. Fresh from their first bank-direct transaction, they’ll realise just how fast, easy, and safe they are. We believe they offer people ‘ultimate payment freedom’, and the stats are there to back this up: 80% of shoppers who use Volt for the first time make a repeat purchase within one month.

Cross-industry use cases

This scenario is relevant to all ecommerce verticals: car rental firms could offer bonus miles, for example, online gaming companies could offer modest bonuses, or fashion retailers could offer loyalty points. Events companies could even offer priority access to customers who pay by bank. In short: there are many potential incentives that merchants across sectors are free to explore and experiment with.

Irrespective of Transformer, it’s clear that Open Banking payments are on the cusp of going mainstream. In the UK alone, more than 26.6 million were initiated in 2021, which represents year-on-year growth above 500%. Arguably, however, they haven’t yet become a real topic of conversation – and, by extension, a recipient of word-of-mouth recommendations – among shoppers. Transformer is what’s needed to change that.

As the ‘voice’ of Volt, Charlie creates the messages behind the Open Banking payments company’s products and proposition, in addition to overseeing its editorial output. Having previously worked in the field of consumer trends, Charlie understands the drivers behind changing shopper habits; particularly in regard to Open Banking and payments.

Volt is building the global infrastructure for real-time payments. Our network of networks unites and harmonises the world’s next-generation account-to-account payment systems, enabling merchants across the globe to accept real-time, account-based payments from their customers – seamlessly, and at lightning speed. Real-time payments, everywhere.