2021 saw Open Banking become the go to option for frictionless payment in eCommerce. Set up in 2018 with the objective of improving financial services for customers, Open Banking has brought increased competition and innovation to the financial services sector. Originally a UK initiative from the Competition and Markets Authority ( CMA ), the goal was to find a way of making it easier for fintech companies to work with large banks to create compelling new financial products and services and the idea was quickly adopted by the CMA’s European counterparts. Today, regulated by the FCA, Open Banking Instant Payments has emerged as a seamless and secure payment method to rival credit cards, while significantly reducing cost.
API call volume for all Open Banking services ( including payments ) increased from 66.8 million in 2018 to nearly 6 billion in 2020
Early adopter Freetrade claim that 70% of their customers now use Open Banking to fund their account with an increase in deposit value of 18%
Open Banking Payments offers users the ability to make payments and initiate subscriptions without the need to manually enter and share credit or debit card details. Transactions are authenticated directly with the bank, leading to a greater than 95% success rate which compares favourably to credit card (typically 70% to 80%). Bank grade security effectively eliminates fraudulent transactions and chargebacks, whilst a frictionless payment process and instant payment directly into the merchant’s bank account round off a compelling business case.
Earlier this year dating platform provider The Dating Lab implemented Open Banking Payments as a way of solving a number of payment problems. The Dating Lab had offered traditional bank transfer as a payment option for some time but found reconciling these payments to be problematic. It was also a laborious payment process for the user and conversions were low. Not only does Open Banking present the user with a frictionless click flow payment journey but the merchant also receives an instant notification once a payment has left the user’s bank account meaning the content can be provided instantly. Operational costs to merchants are much lower than with traditional bank transfer because there are no manual processes involved, for example reconciliation. As any digital merchant would attest to, technical resources are precious and new projects need to be carefully evaluated. The Dating Lab were therefore pleased to find the one API Open Banking integration to be slick and easy to follow.
Here’s what Duncan Cunningham, Director at The Dating Lab has to say:
“The integration with GlobalCharge was one of the simplest and most straightforward that we’ve ever undertaken and best of all, it has enabled us to fully automate the process of accepting direct bank deposits into our systems. Reconciliation of our bank payments has gone from being a manual and time consuming process to being instant and dependable” .
320,000 Open Banking payments were made in 2018, this has subsequently risen to over 4 million in 2020
Open Banking is set to transform the way that payments will be made, so let’s have a closer look at the benefits for online dating providers.
Online dating businesses have been harshly dealt with by the credit card industry, who have used a broad brush approach categorising merchants as high risk. This has led to dating businesses suffering low authorisation rates with costly fees and charges. By using Open Banking, this can be eliminated as payment is made directly to the merchant’s bank account - cutting out intermediaries. Without expensive interchange and card fees, processing costs are up to 80% lower than credit card.
Open Banking Payments go direct from the user’s to the merchant’s bank account. There is no requirement for the user to register or enter the transaction amount or beneficiary account details therefore no risk of input error. There is no clearing time and the money will appear into the merchant’s bank account in a seamless transaction which can be easily reconciled.
Bank level authentication of the payment using face or fingerprint verifies the end user, which virtually eliminates fraudulent transactions. There are no chargebacks or fees for failed transactions either which means that overall costs are considerably lower when compared to credit card transactions.
Credit card payments fail for many reasons – fraud checks, spending limits, card expired, user input error. Through Open Banking, payments go directly from the user’s bank account to the merchant’s account leading to success rates of over 95%.
Real time receipt of funds notification means you can say goodbye to manually reconciling bank payments.
Of significant concern to all eCommerce businesses are the new Strong Customer Authentication ( SCA ) requirements as part of PSD2. The implementation of SCA for card payments remains new and unproven. Most examples today show it adds significant friction to the online checkout experience and projections on how this will impact customer conversions are gloomy.
In contrast to cards, SCA has been baked into Open Banking from the outset and retail banks have been instructed by regulators to keep Open Banking SCA flows to be as frictionless as possible. More on this in the next section.
GlobalCharge has been at the forefront of payment services since 2007 and has a long track record in the dating industry of innovation and reliability. The process of integrating any new technology can cause merchants concern however GlobalCharge has made this integration a simple and easy process through the development of a unique wrapper. This enables the implementation of payment technology into merchants’ existing platform with ease and speed. Any developer with experience of REST APIs and the technical steps required to integrate Stripe, PayPal etc, will find integrating GlobalCharge Open Banking Payments a familiar process.
At GlobalCharge we believe Open Banking is the future for payments removing the complexity and expense of traditional billing solutions, providing a viable alternative to card processing. Our enhanced coverage within the UK and across all the major EU countries enable us to provide the service and support you need as an online dating provider in offering Open Banking Payments to your users.
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