As we approach Black Friday, the Centre for Retail Research (CRR) expects total online sales to rise 52.9% from £3.771 billion (2019) to £5.764 billion this year. Although this is encouraging for ecommerce, online businesses still fall victim to high levels of cart abandonment, card fraud, unexpected refunds and high transaction fees as a part of their day-to-day existence. Open Banking powered payments could change that.
What are Open Banking Payments?
Open Banking payments are essentially payments that are made directly from one bank to another bank, no middlemen or unnecessary steps in the process. Open Banking payments ultimately reduce the amount of fees that merchants pay on transactions that would usually pass through debit or credit card providers. They also reduce the liklihood of fraud and provide a smoother customer experience.
You can read more about the benefits of Open Banking payments in our free to download payment innovation ebook here.
How Open Banking payments decrease cart abandonment.
Open Banking payments are far less complicated than finding or remembering a long card number, expiry date, security code and billing address. Let alone if you are forced to sign up during this process. Considering that 87% of consumers will abandon their shopping if they feel a checkout process is “complicated”, getting the checkout process up to scratch will only help ecommerce businesses convert their visitors into customers.
The Open Banking payments flow is as simple as choosing your bank, approving the payment via your mobile app or online banking without the need for additional online forms, card details or other security measures. This is due to the fact that SCA (Strong Customer Authentication) is built into the Open Banking payment journey. Consumers log into their banking app or online platform using facial recognition, fingerprint or other secure login method to approve transactions. This reduces the amount of steps involved in the payment process when compared to card payment processes and reduces the chance of human error when entering payment details.
How Open Banking payments reduce card fraud for ecommerce businesses.
Open Banking payments don’t just reduce card fraud, they eliminate it. You don’t need a card to complete an Open Banking payment. Which means there are no fraudulent transactions by scammers using other people’s card details. As SCA is built into the Open Banking payments flow, scammers are less likely to make fraudulent transactions. Consumers use their face, fingerprint or other secure method to log in to their banking application on their own device to approve transactions. This makes it much harder for fraudsters.
Ecommerce businesses using Open Banking payments, will therefore benefit from a reduced rate of fraud and a safer, smoother payment journey for customers. Read more about how Open Banking payments improve UX and reduce fraud here.
How Open Banking payments give online businesses ownership of refunds.
There is no need to wrestle with the bank or card infrastructure providers to unlock funds for refunding consumers. With Open Banking reverse payments, businesses control the refund process from start to finish. One benefit of cutting out the middleman in payments and refunds is that the business and consumer can pay each other directly without any unecessary delay. A refund that involves card/payment providers usually takes up to five working days, with Open Banking it could take less than one.
You can find out more about Open Banking reverse payments (refunds) here.
How Open Banking payments would reduce card payment fees.
Transaction fees affect all businesses that accept card payments. Generally costing businesses anywhere from 1% to 4% depending on the card payment provider. This is a significant chunk of fees that are paid on each and every transaction. This in turn shrinks profit margins and in some cases businesses have to push the transaction fee onto the consumer. This Black Friday alone, collectively, merchants could be paying up to £57.64 million in transaction fees.
Businesses and consumers are being unfairly targeted by card transaction fees and Open Banking payments would allow for that fee to be significantly reduced, benefiting all businesses and consumers.