Security and protection are the building blocks in creating trust when making a payment. Open Banking payments are no different and require both the highest security standards and an additional layer of protection from financial providers, in order for consumers to build confidence in using these payment services. It is widely accepted and proven that Open Banking payments are secure. Your details, the transaction information and your purchase data are all encrypted and secure - take a look at our blog post ‘[Is Open Banking safe?](https://www.yapily.com/blog/is-open-banking-safe/)’ to find out more. But what about consumer rights? And what happens when a ‘payment goes wrong’? This is exactly the topic we are exploring in this discussion and offer some suggestions on how to take advantage of the consumer protection mechanisms that are built into [Open Banking Payments](https://yapily.com/solutions/payments).

A lot has been said about the availability of buyer protection measures in interbank payments including the recent consultation by the Payment Systems Regulator. The first point to note is that consumer protection is very different from buyer protection. The distinction between the two types of protection is important in providing the context around what Open Banking can and cannot do for its users.

__Buyer protection:__ Imagine you went online and bought a brand new laptop. When the laptop arrives you realise that its battery won’t charge. You have a right to receive a refund from the merchant or request a new laptop from the merchant.

Buyer protection applies to all purchases regardless of the payment method used. Even when paying by cash, buyers are entitled to a certain set of rights and can address any concerns to Citizens advice. The focus of this article is on consumer protection in payments and what the financial institutions offering payment services can and should do to protect your transactions.

__Consumer protection:__ Now imagine the same scenario but as you were making the payment a hacker tried to intercept your details. It is the responsibility of your account provider to ensure that all your financial details are secure or protected. It is also their responsibility to process the refund discussed in the previous scenario.

## Consumer protection in Open Banking today

In the UK, interbank (account-to-account) payments have increased significantly since the introduction of [Open Banking](https://yapily.com) that allows users to initiate payments with more ease and less friction. Naturally, given the ease and simplicity of the payment, the question then arises, would I still be protected if the payment goes wrong? In short, yes!

Firstly, consumers are always protected when a payment goes wrong under the Payment Services Regulations 2017 (PSRs), regardless of whether they paid by bank or by card. The PSRs provide legal protections for wrongly executed payments regardless of payment type. The customer is always entitled to a refund by their bank if ‘something has gone wrong with the payment’ and it was the bank’s fault (for the lawyers in the room, see Regulation 91 of the PSRs 2017). Under the same legislation, in a scenario where funds are misdirected, the merchant’s payment service provider (aka their bank or account provider) must cooperate with the payer’s payment service provider in its efforts to recover the funds, in particular by providing to the payer’s payment service provider all relevant information for the collection of funds. 

Looking beyond the primary legislation itself, there are a number of escalation mechanisms that are available to consumers when something goes wrong with their payments, again regardless of whether they paid by bank, Open Banking or card. Firstly, their account provider, by law, needs to have in place a complaint and dispute resolution mechanism to support customers who are unsatisfied with the services they have received. In addition, the Financial Ombudsman Scheme is always available where a consumer or micro-enterprise wishes to escalate a complaint about a payment service. 

It is clear that there is a strong and effective legal framework to ensure consumers are protected, but what about the industry itself? The Open Banking industry is still in its infancy and the firms providing these services have every incentive to build a trusting relationship with their customers despite the challenges and level of complexity that they face. For example, when making a decision on whether to pay by card or by bank, at this moment in time consumers have to balance the following:

- the perceived and ingrained protection benefits offered by their card provider - such as a guaranteed and speedy refund. 

- the ease of an Open Banking transaction, with a level of uncertainty on the level of protection they are afforded. 

It is against this backdrop that TPPs have gone to great lengths to afford the same level or greater protection to their consumers even when it is not within their remit or required by legislation. We have seen a great change in the way that consumer complaints are dealt with in this space. From round the clock dedicated support teams to continuously reduced waiting times for issues to be fixed. In some instances where a payment was initiated using Open Banking, Payment Initiation Service Providers (PISPs) would even take a step further and provide refunds directly to a consumer, and take the risk of being reimbursed subsequently by the merchant (with which they may have a commercial arrangement). 

Finally, technology has an important role to play in protecting consumers that use Open Banking. As this industry is still relatively new, firms have the ability to use the latest available technology, harness the power of data and are not hindered by legacy IT infrastructure in delivering their services. As such, they are arguably far better placed to identify instances of fraud or fix other issues that may compromise the integrity or completion of a payment transaction.

## Consumer Protection in Open Banking tomorrow

With all the available evidence, it is clear that paying by Open Banking offers at least the same consumer protection as paying through other payment methods, noting that Open Banking is effectively an easier way of initiating interbank payments. Can more be done going forward to strengthen this position? 

As with anything, there are always areas that can be strengthened. However, it is important that the proportionality of any additional measures is taken into consideration. From our experience we can say that the instances where consumers suffered harm as a result of lack of consumer protection in Open Banking were minimal - even when taking into account the considerably smaller volume of transactions initiated through Open Banking. Additional measures would be hard to justify and potentially increase costs for a nascent and fragile industry that is doing its best to protect consumers. On the one hand, Open Banking payments are not funded by interchange fees in the same way as card payments are and increasing charges for such payments will make them unappealing from a commercial perspective leading merchants to stop offering them. Finally, Open Banking is simply a way of initiating an interbank payment which means that it benefits from the existing protection measures of such payments. Ultimately, a move towards more (expensive) protection will hinder innovation for marginal improvements in consumer protection. 

There is however one potential development that could support confidence in the entire Open Banking ecosystem: extending Confirmation of Payee (CoP) to Open Banking peer-to-peer payments. CoP is a name checking service that checks whether the name provided by a payer when initiating a payment to a new payee, matches their sort code and account number. If the details do not match then the consumer is issued with a warning that they may be sending money to the wrong or a fraudulent account. This mechanism helps reduce the level of fraud in interbank payments but currently is only available to banks and other account providers. It would be a reasonable extension to enable this additional layer of fraud protection for peer-to-peer Open Banking payments given that they are already provided when making interbank transactions. When it comes to merchant payments, CoP should be set aside due to commercial contracts that populate account details automatically, meaning CoP would only add friction. Regulatory bodies are currently considering its extension to peer-to-peer Open Banking payments. 

Such a step would be a massive leap forward as it would support all industry players in protecting their customers, thus building more trust in the ecosystem and promoting accelerated Open Banking adoption. 


Building Consumer Protection in Open Banking Payments

Open Banking payments are no different to interbank payments and require both the highest security standards and an additional layer of protection from financial providers, in order for consumers to build confidence in using these payment services.

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](https://yapily.com/open-banking/payments) could change that. 

## What are Open Banking Payments?

[Open Banking payments](https://yapily.com/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](https://yapily.com/payments-ebook).

## 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](https://yapily.com/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](https://www.yapily.com/blog/how-open-banking-payments-can-improve-ux-and-prevent-card-fraud/) [here.](https://www.yapily.com/blog/how-open-banking-payments-can-improve-ux-and-prevent-card-fraud/)

## 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](https://www.yapily.com/blog/what-are-reverse-payments-in-open-banking/), 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](https://www.yapily.com/blog/what-are-reverse-payments-in-open-banking/) (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.


4 ways Open Banking payments can help ecommerce businesses

How Open Banking payments can benefit ecommerce businesses and online payments.

Given the rise in online payments and the increase in demand for digital products and services since the start of the pandemic, reverse payments was something we were keen to launch. Reverse payments are not refunds as [Open Banking](https://yapily.com/what-is-open-banking) payments cannot be unwound. This is why the term ‘reverse’ is used to describe them. 

## How a reverse payment works in practice.

When a [Yapily](https://yapily.com) customer initiates an Open Banking payment, reverse payments allows them to indicate to the bank that they wish to retrieve the refund account information as part of the payment details returned from a successful payment. 

Should the payer request a refund in future, a Yapily customer can look up the payment details using the payment ID from the original payment. Allowing them to locate the payer account details, and initiate a subsequent payment to the payer, to effectively "reverse" the original payment. 

## What are the benefits of reverse payments?

Ecommerce businesses would benefit from having full control over their refund process. Being able to set and control the terms of the refund would decrease unexpected disruption. Dealing directly with the buyer/payer as opposed to a credit card company, bank or other payment provider, who have been instructed to retrieve a refund. 

Another benefit to reverse payments via [Open Banking](https://yapily.com) is that money passes from bank-to-bank, in the same way the initial [Open Banking payment](https://www.yapily.com/blog/how-open-banking-payments-can-improve-ux-and-prevent-card-fraud/) is made. Meaning there are no waiting times for middlemen to pass money from merchant accounts on or unnecessary fees. This, in theory, would allow businesses to be more efficient in the refund process and predict the timeframe more accurately. 

Consumers also benefit from receiving reverse payments directly to their bank account. If payments are made via credit card or e-wallet, refunds can end up in the card account or an e-wallet, which you would then need to transfer back to your bank account. In some cases the money will stay in your credit card account until you spend the value to get your account to zero. This problem is eliminated with Open Banking.

## What is next for Open Banking reverse payments?

As Open Banking reverse payments are not yet mandated in the UK, not all banks are currently supporting this functionality. But many have started to introduce them, continuing to build on the strong reputation the UK has for Open Banking development. Although the UK is leading the way, for European countries using the [Berlin group Open Banking standard](https://www.yapily.com/blog/psd2-screenscraping-apis/), reverse payments should be an easy functionality to access. This is due to the payer IBAN already being captured in the initial payment initiation request. Expect reverse payments to become part of the standard as we see the adoption of Open Banking payments continue to rise.

To read more about the benefits of Open Banking payments, [download our free payment innovation ebook here.](https://yapily.com/payments-ebook)


What are Reverse Payments in Open Banking?

A Reverse Payment is an essential functionality for a merchant when using Open Banking, ultimately Open Banking reverse payments are refunds. However, they work in a slightly different way to traditional refunds, hence why they are called reverse payments.

Since the introduction of [Open Banking](https://yapily.com), card payments are becoming a thing of the past and so is the difficulty we have when using long numbers and pieces of plastic. Do you remember when a scribble on a piece of paper is what was used to prevent card fraud? It was called a signature right? Well, luckily that is something that we have outgrown.

We are all very familiar with trying to find your card details when buying something online, or needing to enter your pin in a card machine when you are out for a meal. The user experience of card payments has become second nature. However, there are better more efficient ways of making payments. The rise of contactless and e-wallets are over-powering traditional card payments by rapidly improving how we interact with payment processes.

Ultimately, consumers want to be able to make payments as easily as possible; especially in a world where 87% of consumers will abandon their shopping if they feel a checkout process is “complicated”. Businesses need to adapt the payment systems they use to suit the new consumer demand. Guest checkouts are also a controversial issue in e-commerce. There are still numerous websites who force consumers to sign up to be able to make a purchase. This involves forms of data that are stored by the company, so that the consumer doesn’t have to re-type details into the checkout system each time they make a purchase. This is another reason as to why consumers ‘drop off’ during a payments journey. Many customers are not keen on allowing their card or personal details to be stored by websites.

Typing in passwords, card numbers and banking details into online sites during payments is generally safe, but [“card not present fraud is now 81 percent more likely than point-of-sale fraud.”](https://shiftprocessing.com/credit-card-fraud-statistics/) Card not present fraud usually takes place online or over the phone, using the details of someone's card without physically having it to hand. [Recent statistics published by UK Finance](https://www.ukfinance.org.uk/system/files/Fraud-The-Facts-2020-FINAL-ONLINE-11-June.pdf), showed losses from fraudulent CNP transactions for UK issued cards totalled £470.2 million in 2019.

## How can we improve the payments flow to help with making checkout processes more efficient and less susceptible to fraud?

Using an [Open Banking payments](https://yapily.com) journey could help solve these issues. 

First let’s consider UX and how firms can simplify the checkout process. Although Open Banking payments allow for businesses to control the UX more effectively than they can with traditional card processes, they also allow for a safer and faster method of payment or data transfer. This in turn could reduce the need for forms and card details when checking out on a site for the first time. Paying with [Open Banking](https://yapily.com) will allow the transfer of personal details and payments given the consent of the consumer, moving towards a frictionless payments service, whereby consumers can buy with fewer clicks and without typing sensitive information into a payment process.

Secondly, fraud can be mitigated by adopting Open Banking payments. They were built with SCA in the flow, confirming a payment via the native baking application on the web or a mobile device, reduces the risk by eliminating card details from the process. It also means that in an app-to-app journey or decoupled flow, the consumer can authenticate payments on their mobile device using facial recognition or their fingerprint to log into native applications, improving the security further. The benefit of these methods is that it limits the sensitive data typed into online forms and uses the native security, that is already built into devices and banking software. Afterall, it is extremely difficult to imitate someone’s face or fingerprint to commit fraudulent transactions on their personal device as opposed to using someone else’s card details.

When you consider the benefits of using Open Banking payments laid out above, it is a no brainer. Payment journeys need to be improved and [Open Banking payments](https://yapily.com) are the innovative solution needed to solve the issues that currently exist within the online payments flow.

[You can read more details around the benfits of Open Banking payments and the effects that it will have on businesses and payment infrastructure here.](https://yapily.com/payments-ebook)

How Open Banking payments can improve UX and prevent card fraud

Open Banking payments will soon be used universally, with the current rise in digital payments the argument to speed up adoption intensifies. Open Banking payments will reduce fraud and improve UX at checkouts dramatically. 

__30th April 2020:__ Leading enterprise connectivity platform Yapily has announced it is working with payments company Ordo, to power Ordo’s new payments service. The platform, which launched at the beginning of April and provides users with simple, swift and secure invoicing, tracking and payments, has launched with its Neighbour2Neighbour initiative - helping small businesses, volunteers and their neighbours during the COVID-19 crisis.

Ordo’s new service supports volunteers, friends or family who are running errands, such as collecting and paying for shopping or essential items, on behalf of critical workers and those self-isolating who are unable to make it to the shops themselves. Currently, volunteers either have to share confidential details with strangers to receive payments, or they have to share physical notes and coins between one another, which presents a potential infection risk.

Ordo’s Neighbour2Neighbour initiative ensures volunteers can instantly request and receive payments digitally from those who have received help. Through its secure and scalable open banking API, Yapily enables Ordo to access its users’ account information and initiate payments from their bank accounts, using only an email address or mobile number. Yapily connects to their clients’ bank accounts, allowing them to focus on delivering faster access to financial services, while Yapily manages the seamless connectivity behind the scenes. 

The service works by the person needing to be paid back, sending a ‘smart request’ for payment to the person who needs to pay - for example, for money owed for shopping done for a self-isolating neighbour. The service then tracks payments for both parties so everyone can see what’s been paid when and by whom.

Ordo also recognises times are tough for small businesses too, and they are extending their free trial bundles to businesses to help keep them going during COVID-19.

__Stefano Vaccino, CEO at Yapily__ said, “Ordo’s new Neighbour2Neighbour service is a simple and effective solution to a sad situation within our communities - helping people pay for and share money. It epitomises the power of open banking for good, for both our society and our economy, and we’re delighted to be helping them to deliver the service. 

“Open banking means payments can be made for a fraction of the cost, which for many businesses who are experiencing challenging times, is a crucial cost-saving. It’s inspirational to see volunteers come together to support the more vulnerable and we’re proud that our open banking API is helping to simplify and protect transactions between customers.”

__Craig Tillotson, CEO at Ordo__ said ”Our partnership with Yapily has allowed us to launch with a broad range of banks, making the Ordo service even more attractive to our users at this difficult time.  Yapily’s expertise in open banking, and our own background in payments services and Faster Payments means we’ve got a service that volunteers and small businesses can use today, confident that we will deliver them simple, swift and secure payments”

Yapily’s  proprietary open API enables companies to access the financial information needed to meet rising customer expectations in banking, lending, payments, accounting and money management. It has Fortune 500 companies and fast growth fintechs as clients, including Intuit QuickBooks. 


---


__About Yapily__

Yapily is an enterprise connectivity platform, enabling companies to seamlessly access users’ financial data. Powering a new era of financial services, Yapily empowers people around the world to receive faster, affordable and personalised products. The company has raised $18m funding to date, and over the last six months monthly recurring revenue has grown over 500%.

__About Ordo__
<https://www.ordopay.com>

Ordo is the new trusted way to request, make and receive payments that’s simple, swift and secure. With investment  from Nationwide Building Society Ventures, Ordo is specifically designed to give customers control and flexibility over payment requests. Previously the leadership team behind the Faster Payments Scheme, Ordo has a strategic partnership with CGI - the global IT consultancy, and AND Digital, providing engineering resources to Ordo directly. 

Fintechs Ordo and Yapily collaborate to solve payments in COVID-19

Ordo and Yapily partnership announcement - Open Banking

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Fintechs Ordo and Yapily collaborate to solve payments in COVID-19