As a purchaser of payment solutions, you are likely familiar with the drawbacks of conventional online payment methods, such as card payments and manual bank transfers, issues like high costs, elevated failure rates, and subpar user experiences, to name a few.
What is it?
Open banking represents a banking approach wherein third-party financial service providers are granted unrestricted access to consumer banking, transaction, and additional financial information from both banks and non-bank financial institutions. This access is facilitated through the utilization of application programming interfaces (APIs). The concept of open banking facilitates the interconnection of accounts and data across various institutions, offering benefits to consumers, financial entities, and third-party service providers. This evolving practice is emerging as a significant driver of innovation with the potential to profoundly transform the banking industry.
However, the challenge lies in selecting the provider capable of crafting the optimal open banking payment experience for your business amidst the continually evolving landscape.
Navigating the opportunities and hurdles presented by open banking requires identifying a reliable partner to maximize the potential of this technology. This article provides insights into the impact on traditional payment methods and the potential opportunities in open banking.
Navigating the opportunities and hurdles presented by open banking requires identifying a reliable partner to maximize the potential of this technology. This article provides insights into the impact on traditional payment methods and the potential opportunities in open banking.
How can it benefit your business?
Online businesses stand to gain significant advantages from Open Banking payments. In contrast to collecting payments through cards or wallets, Open Banking offers the following benefits:
Cost Savings:
Open banking can be more cost-effective than traditional payment methods, resulting in substantial savings on commissions.
Improved Acceptance Ratios:
Direct banking payments through Open Banking are seldom declined by banks, leading to higher acceptance ratios compared to other methods.
Accelerated Time-to-Market:
Companies can expedite their entry into the market as obtaining a merchant account involves less technical and paperwork requirements. Businesses can commence collecting payments within a few hours, with four simple steps followed by clients:
- Choose their bank
- Sign in to their account
- Authorise the transaction
- Payment completed
Reduced Cash Gaps:
In the Open Banking process, funds reach a merchant's bank account within seconds, eliminating delays associated with cash flow.
Who is the provider?
When making significant decisions, thorough research into an institution's specific open banking strategy and investments is crucial. Financial institutions aiming to collaborate with third-party technology providers should conduct thorough due diligence to assess vendor qualifications. Initiating an open discussion with a core technology provider and exchange of documentation serves as a valuable starting point, allowing for insights into available solutions and market awareness.
Engaging in conversations with peer banks to learn about their experiences can provide valuable insights into the next steps of an institution's open banking journey. For those looking to introduce new fintech-driven products tailored to customer experience, participation in fintech social events can offer valuable perspectives on how professional organisations are propelling the open banking movement.
How safe is open banking?
Concerns about the security of open banking are understandable, particularly when it comes to sharing financial information across platforms. However, a key security aspect of open banking is that you don't need to share your banking credentials with third-party service providers. Instead, authentication occurs directly with your bank. Moreover, financial institutions are restricted from sharing your information without your explicit consent, and you retain the ability to withdraw that consent at any time.
What is the future of Open Banking?
Open banking has the potential to revolutionize the financial services industry by encouraging collaboration between traditional banks and innovative fintech startups, offering consumers more choices, and fostering the development of new and improved financial products and services. As open banking regulations gain traction in more countries and technology advances, new opportunities for innovation are set to emerge. The emergence of embedded finance, where non-financial companies seamlessly integrate financial services into their platforms, serves as a promising indicator of the potential growth in open banking.
How can we help?
Contact us if you need assistance with the selection of a suitable provider.
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