[BNPL for Business] Why we’re ready to pay the price for open banking

Improving the overall payment experience

It’s not every day you hear a company asking to pay for something. But in our response to the upcoming roll-out of commercial Variable Recurring Payments (VRPs), we’re doing exactly that. To understand why we want banks to charge us, we need to start from the beginning.

In 2016 the Competition and Markets Authority (CMA) introduced a new competition remedy, imposed on the UK’s nine largest retail banks. The intention was to encourage competition and innovation by making banks’ data sets, historically kept locked within their systems, available to third-party fintechs. Enter open banking.

If implemented well, open banking brings about a win-win-win: it gives financial services providers a better understanding of the customer journey, letting them create new product offerings to add to their market appeal. For businesses, these innovations reduce time spent on manual tasks and lower the cost of payments, improving their bottom line. And for consumers, competitive options from financial services providers present better ways to spend, borrow and invest.

Fintechs take the wheel

Six years on, open banking payments in the UK have grown exponentially (albeit from a small base), doubling in the first half of 2023 compared to the first six months of 2022, before hitting a record high of 14.5 million payments in January 2024. These are impressive milestones, but when you consider there were over 45 billion payments made in the UK in 2022 alone, this is still just a drop in the ocean.

For any technology, it’s a long journey to get to true mass adoption — and we’ve only just taken the first steps. This is especially true for a technology like open banking that requires multiple parties to all get aligned and move in the same direction.

The industry recognizes the potential of open banking. In its latest market review the Payment Systems Regulator (PSR) acknowledges that, if the UK is to break the card-based duopoly, open banking is the way forward. This echoes what Joe Garner highlighted in his Government-commissioned Future of Payments Review last year.

Open banking has the potential to create a lower-cost alternative to card schemes while improving the payment journey for payers, but there are many issues left to address. One of these is creating the right commercial incentives for everyone in the ecosystem. Banks have previously been criticized for treating open banking as a compliance task rather than a commercial activity — and without these incentives in place, they will continue to do so.

(Fonte: TechRadar)

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