Open Banking Payments: 5 Ways Merchants Reap the Rewards

Lorraine Fahy

06th Mar 2023
Open Banking Payments: 5 Ways Merchants Reap the Rewards

Open Banking is quickly becoming a popular alternative payment choice for merchants across Europe, empowering them to offer their customers with a fast, secure and seamless way to pay directly from their bank accounts. By 2024 it is predicted that West Europe will account for 56% of API calls globally, where the regulator-led approach has created a standardised market with low barriers to entry (Juniper Research, 2023).

The value of global Open Banking payment transactions will exceed $330 billion by 2027, up from $57 billion in 2023.
It is also predicted that the development of new use cases, such as bill payments which are expected to account for more than $59 billion globally in transaction value by 2027, will be instrumental to ensuring that Open Banking fulfils its potential.

Source: Juniper Research, 2023

The impact of Open Banking is only just beginning to be felt, but its potential benefits for merchants are significant. By embracing this capability, businesses across Retail, Hospitality, Automotive, Hardware and Services can enhance customer security, improve the checkout experience, and drive profitability. Prommt is leading these markets with our Open Banking solution, Pay By Bank, which delivers significant savings on payment operations costs and reduces revenue leakage due to card fraud & chargebacks. Pay by Bank is being adopted by more Prommt clients every week. For accounts where it is enabled, you can expect to see over 50% of payment volumes flow through Open Banking compared to credit/debit card. Pay by Bank is bringing more high-value transactions onto our platform, with many customers utilising our solution to replace cumbersome bank transfers and card payments.

5 Ways Merchants Reap the Rewards of Open Banking

 1. Reduced Transaction Fees

Traditional payment methods, such as credit and debit cards, often come with high transaction fees which can eat into a business’s profit margins. Open Banking payments reduce the cost of transactions by eliminating intermediaries such as card networks, and by streamlining the payment process by providing a direct link between the customer’s bank account and the merchant’s account. This can result in cost savings of up to 90% compared to traditional payment methods, according to a report by McKinsey (2022).

 2. Fraud Mitigation Tool

Open Banking payments use advanced encryption and real-time authentication methods to protect sensitive data, such as bank account details and personal information, from cyber-attacks. According to a report by Juniper Research (2023), the adoption of Open Banking APIs could reduce fraud by up to 61% by 2024. Open Banking is backed by the EU Payment Services Directive and is designed to ensure safety and security. Payments made through Prommt’s Pay By Bank are conducted using PSD2/Open Banking protocols, and protected by industry-standard banking security. Pay By Bank offers greater protection from card fraud & chargebacks and reduces payment operations costs.

 3. Faster Payments

Open Banking transactions are processed in real-time in the UK, which means that funds are transferred directly from the customer’s bank account to the merchant’s account within seconds, eliminating the need for lengthy settlement periods.

 4. Enhanced Customer Experience

Prommt empowers guests to feel in control of their experience with the option to Pay by Card or Bank and through multiple currencies. With Prommt, businesses can send merchant-branded and customisable payment links. Customers will see a URL they recognise, embedded in the corporate website. Branded payment request emails are delivered from the merchant’s official domain, and SMS from a custom SMSID. The ability to carry one’s brand throughout the payment journey builds trust.

 5. Maximised Payment Success

By offering consumers the ability to pay directly from their bank accounts, retailers can reduce the number of abandoned transactions due to customer inconvenience. Pay By Bank offers a Default Payment Method feature that enables merchants to easily switch the default payment setting from card to bank, encouraging customers to pay through bank transfer vs card. The card option will still be available, but as the second option, customers are more likely to select the Pay By Bank method, which will reduce card fees.

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