Open Banking, the UK’s implementation of Europe’s Second Payment Services Directive (PSD2), has had something of a slow start, with limited adoption, then COVID-19 and Brexit hitting but the principles behind it are solid. Its fundamental changes to how banks handle financial information mean that banks can now share the kind of information that you would see on an account statement with authorised providers – with a client’s permission of course – and add a host of security, scalability and flexibility features that open up the possibility for new revenue streams for merchants.
One of the key ideas behind these changes is that they enable innovative digital companies to analyse your spending habits and make recommendations. For example, they could see that you are spending £100 on electricity and therefore recommend a new provider that will give you the same service for £80, or recognise that you spend a lot on debt repayments and recommend a debt consolidation loan. A third party could even advise you that you are paying too much for overdrafts or too little in interest and that it would be prudent to switch banks, or a loan provider could instantly and securely assess your finances to see if you are eligible for a loan.
Another new service that open banking makes available is Account-Based Payment. This is a faster, more secure and potentially far more convenient way of conducting payments between consumers and merchants, or two consumers. In a hypothetical example, an eCommerce store customer at checkout would select their bank, authenticate themselves via the bank’s own Strong Customer Authentication (SCA) and would then be able to pay for all future payments much quicker than they would otherwise. In stores, a shopper could scan a QR code or use Near Field Communication (NFC) to link with the merchant’s account then make payments. Unlike traditional debit, credit and eWallet payments, account-based payments eliminate many fees attached to payments, deposit funds immediately and allow customer-friendly services like instant refunds.
But there are behind-the-scenes aspects to Open Banking that most consumers will be unaware of and which have a direct impact on the acquiring and payments space. The changes will allow new entrants into every aspect of banking, and they will inevitably be able to offer services that can do some of the things that acquirers can do better, faster or cheaper.
Since Open Banking is increasing competition, how do acquirers take advantage of new systems and add value for merchants?
New ways to add value
One of the new roles Open Banking is opening up is that of a Payment Initiation Service Provider (PISP), responsible for creating the infrastructure behind account-based transfers. Several companies that work in this space already exist and they are likely to be joined by other new entrants into the market, including existing payments and FinTech companies who have existing trust and relationships.
I would say that one key way to use the structures is, as an acquirer, to propose an alternative way to pay online from the bank account – which is already proposed in some countries via specific brands or bank buttons
For example, there is the possibility to offer customers easier payment experiences when they are abroad. Currently, when paying for services in a foreign currency you will see your payment in that currency, but Open Banking will allow for payments in the currency you use, incentivising buying from overseas and making things easier when tourism returns.
Security is another key factor, and somewhere that acquirers can offer services to merchants. Anything that involves the ‘opening up’ of data would seem to bring with it security concerns and opening up banking data even more so. Acquirers need to show that when information passes through their hands it will not be compromised, and this means demonstrating that they follow the latest security protocols.
Any of the above, and the no doubt huge range of new products that Open Banking will enable, could be added to the existing services that acquirers provide, allowing them to keep up with newer companies.
End-to-end solutions for the market
As an end-to-end solutions provider, Worldline can offer acquirers the support that they need to keep ahead of the curve. Our WL Digital Banking Platform integrates a module that enables your company to comply to PSD2 requirements, while also having the latest security systems and open APIs that allow you to accelerate innovation.
As Open Banking becomes more prevalent and new capabilities are developed, we can continue to develop them quickly as modules that you can choose to deploy in your own offering, empowering you to offer the best possible service to your clients.
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Marc Docherty, Head of UK Acquiring / Large - Strategic Business, Worldline
Marc Docherty is Head of UK Acquiring / Large - Strategic Business, at Worldline. With more than 20 years’ experience working for blue chip organisations within the banking and payments sector, including Bank of Scotland, RBS, Barclaycard, AMEX and Visa, Marc’s expertise lies in business banking, factoring and invoice discounting, and cross border payments. He also has extensive experience in acquiring, having focused on the large corporate sector across the UK and Europe for several years.
Marc is passionate about driving solutions that deliver real value to customers whilst helping organisations reduce complexity and enhance the customer experience by providing a complete end-to-end payment solution.
Worldline [Euronext: WLN] is the European leader in the payments and transactional services industry and #4 player worldwide. With its global reach and its commitment to innovation, Worldline is the technology partner of choice for merchants, banks and third-party acquirers as well as public transport operators, government agencies and industrial companies in all sectors.
Powered by over 20,000 employees in more than 50 countries, Worldline provides its clients with sustainable, trusted and secure solutions across the payment value chain, fostering their business growth wherever they are. Services offered by Worldline in the areas of Merchant Services; Terminals, Solutions & Services; Financial Services and Mobility & e-Transactional Services include domestic and cross-border commercial acquiring, both in-store and online, highly-secure payment transaction processing, a broad portfolio of payment terminals as well as e-ticketing and digital services in the industrial environment. In 2019 Worldline generated a proforma revenue of 5.3 billion euros.