Open banking is a death knell for card payments
The coronavirus pandemic has accelerated a shift to frictionless digital money transactions
With any kind of retail, the payment experience is crucial. It’s why Amazon has been trialling cashierless grocery stores in the UK. No physical payment card is needed. Shoppers put items in their basket and leave. During the pandemic, consumers abandoned cash for contactless. The next move is towards open banking, allowing money to move directly from people’s accounts.
Cashless and mobile payments, more online debit card usage, as well as the growth in ecommerce, were around before the coronavirus hit. Yet COVID-19 has accelerated the shift to more frictionless digital money transactions. More than 12 months since the first lockdown and an increasing number of “digital first timers” are purchasing online. Now everyone is used to this new normal.
“The public’s behaviour has shifted into the future. Many more consumers expect speedy, simple, secure and convenient payment experiences. There is no going back to greater friction. An increase in the UK’s contactless payment limit helped. Open banking payments are now a natural progression. It’s why it’s one the fastest-growing payment methods in the UK and Europe,” explains Ciaran O’Malley, vice president of partnerships at Trustly, a global leader in open banking.
Trustly, a fast-growing unicorn, which processed more than $21 billion in transactions globally during 2020, is powering the shift to a cardless society.
Among millennials and Generation Z shoppers, there’s even greater movement when it comes to payments. More than half of 16 to 24 year olds and 45 per cent of 25 to 35 year olds now use fingerprint or face ID rather than enter card details to make payments, according to a Europe-wide survey of 10,000 consumers. In China, the value of cardless payments is now greater than the rest of the world’s debit and credit card payments combined.
“Open banking payments using a consumer’s bank login to authenticate the user is a natural progression for multichannel purchases in a post-COVID world. If I want to buy something online and pick it up in-store, flexibility when it comes to payments is crucial. This is true if goods are delivered to my home and I pay for what I keep, or for more experiential retail where I access different services in-store,” says O’Malley.
“Payments are increasingly merging with digital identity for ease of use, involving biometrics. This also eliminates identity fraud. It’s the new frontier. Fees are also going up for credit and debit card payments, which impacts retailers. The cost of cross-border transactions are rising as well; regulatory issues around Brexit haven’t helped.
“Trustly supports more than 6,300 banks and enables over 525 million consumers to pay at 8,100 merchants across 30 countries. By bypassing the card rails, the open banking leader can offer payments that are free for consumers and up to 50 per cent cheaper for merchants than cards. This is Trustly’s secret sauce.”
For businesses to grow internationally, they need to be able to make frictionless transactions, not pay up to 1.5 per cent or more for cross-border charges. What could also drive further adoption of open banking and online banking payment services is instant refunds. This differs from payments made by card where a refund can take several days to arrive after the returned goods have been received by the merchant.
“It’s an underinvested area that can improve customer experience. This feature has proven to increase revenue and customer loyalty. If consumers are offered instant money back, they will choose this so they can make new purchases right away. The fact is, payment processes don’t need to be complex, they just need to work really well,” says O’Malley.
In the future, legacy physical cashier tills in stores could become irrelevant. More customers will click online and pick up in-store knowing that a payment is made when they cross the threshold. It’s a world where transactions are not limited by the shopping channel consumers use. Large stock inventories won’t necessarily be needed in stores. This will enable retailers to offer a greater range of services, products and seamless experiences.
“Open banking and online banking payments are a natural fit for the 21st century, omnichannel shopping experience. This evolution provides ultimate flexibility for the customer,” says O’Malley. “This is what it’s all about.”
For more please go to www.trustly.com