How Payment Service Providers can innovate with open banking

In recent years, card payments have left merchants with a transaction bill of more than £1 billion. How can Payment Service Providers leverage open banking to innovate the payments landscape and eliminate unnecessary fees?

A recent surge in card transaction costs has significantly impacted merchants as both Visa and Mastercard collectively raised their fees. This controversy took centre stage when Amazon warned it would stop accepting Visa credit cards, despite reaching an eleventh-hour solution.

Amidst a backdrop of rising inflation, these hikes are weighing heavily on businesses’ shoulders. Research shows that merchants spend more than £1 billion in interchange and transaction fees to accept card payments. This is further intensified by costs incurred from failed card payments with an estimated 12% decline rate.

At a time when merchants are already grappling with reduced consumer spending, Payment Service Providers have an opportunity to eliminate these complexities with a merchant-friendly payment method.

Open banking payments

Merchants have to currently pay between 2% and 8% of every sale to card, e-wallet and BNPL providers - costs that are ultimately passed onto the consumer.

Open banking payments, otherwise known as account-to-account payments, have come to be recognised as a fairer option. Unlike card networks, open banking removes the middleman and its associated fees, driving a promising margin for both Payment Service Providers and merchants.

Open banking’s growth has been phenomenal, gaining traction faster than contactless card use during its early years. It’s now at a tipping point as users surpass six million, representing a lucrative £7.2bn opportunity.

Instant payment settlement

As businesses fight inflation, cash flow remains a priority for all. Merchants, in particular, need support with faster payment settlement to sustain a positive cash flow forecast.

Yapily Payments enables Payment Service Providers to facilitate instant account-to-account payments between consumers and merchants, settling in seconds rather than days.

For the end customer, the payment flow is as simple as choosing their bank and approving the payment via online banking, ultimately removing the need for tapping in card details or other security measures.

Protect against fraud

As the retail payments landscape grows, so does the threat of fraud. Unauthorised card fraud has become a serious issue for merchants - in the first half of 2021 alone, criminals stole a total of £753.9 million.

Embedded with Strong Customer Authentication (SCA), open banking payments add an extra layer of security that card networks fail to offer. Not only does this benefit Payment Service Providers and merchants, but reassures the end customer too.

Moreover, open banking payments are optimised to provide customers with the most seamless authentication flow, offering a layer of protection without taking away from the user experience, all without the need to share and store any personal details.

Leaving cards behind for good

Trilo is one Yapily partner leveraging open banking to scrap transaction fees for good. Bringing the benefits of open banking to the wider retail market, Trilo enables both online and point-of-sale payments through its single payment platform.

Harnessing Yapily’s open banking infrastructure, Trilo empowers businesses to move away from card payments, unlocking hidden revenue that transaction fees would otherwise deplete. Trilo also helps merchants bring back customers with rewards, boosts, and an ultra-fast shopping experience.

Limiting hidden checkout fees

Volume is another Yapily partner innovating the payments landscape by reducing fees based on a percentage of the total basket.

Volume is the only digital checkout that doesn’t require typing credit and debit card details or email and password. Volume’s Tansparent Checkout directs consumers to their banking app’s biometric authentication check. Once the payment’s approved, the money settles instantly with the merchant.

The future is fairer for merchants

Open banking provides merchants with a fairer choice, allowing them to offer multiple payment options so they’ll no longer be tied to dominant card schemes.

By combining the speed of account-to-account payments with access to data, open banking will transform how Payment Service Providers serve merchants. With demand for a more fluid digital payment journey, it’s no longer a question of whether Payment Service Providers should leverage open banking payments, but when.


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