Open Banking Platforms: A Merchant’s Guide to Smarter Payments

The payments world is evolving fast, and merchants need to keep up. Customers expect smooth, secure, and fast payment options, and traditional methods just don’t cut it anymore. That’s where open banking comes in – a game-changing way for businesses to handle payments and improve customer experience.

But with so many open banking platforms out there, how do you know which one to choose? This guide explains what open banking is, why it’s a smart choice for merchants, and how to find the right platform to power your payments.

What Is Open Banking?

Open banking is a system that lets businesses and customers have more control over payments and data. Traditionally, banks kept this information to themselves. With open banking, secure systems called APIs (Application Programming Interfaces) allow banks to share customer account details with approved third parties, but only with the customer’s permission.

This means businesses can take payments directly from customers’ bank accounts without needing cards or long bank transfers.

Key Features of Open Banking

• Secure Systems: APIs make sure data is shared safely.

• Customer Permission: Customers must agree before their data is shared.

• Transparency: Customers can see and control how their data is used.

Benefits for Merchants

• Payments are simpler and faster.

• Costs are lower compared to traditional payment methods.

• Customers feel safer and trust the process more.

Fun Fact: By 2024, open banking is expected to handle over $116 billion in global payments (Juniper Research).

Why Open Banking Is Great for Merchants

Open banking is changing how businesses work. Here’s why it’s so helpful:

1. Lower Costs

Open banking avoids the high fees charged by card companies. Businesses can save up to 20% on transaction fees (Merchant Savvy).

2. Faster Payments

Payments are processed quickly, often in real-time. This is great for businesses that need money right away. Statista found that 65% of businesses using open banking had better cash flow.

3. Safer Transactions

With open banking, strong customer authentication (SCA) and secure systems lower the chances of fraud. Fraud rates are 40% lower compared to card payments (European Payments Council).

4. Better for Customers

Customers enjoy a faster checkout process. They don’t need to type in card details—instead, they use their bank’s secure interface. A YouGov survey showed 72% of customers like open banking for its ease and security.

5. Works Internationally

Many platforms support different currencies and countries. For example, Plaid connects to over 11,000 banks across Europe and North America.

How to Choose the Right Open Banking Platform

When selecting an open banking platform, it’s crucial to evaluate your business needs and match them with the platform’s features. Here’s what to consider.

Check the bank coverage, in order words how many banks the platform connects to and in which countries. The wider the coverage, the more customers you can serve.

Look for platforms that offer more features than just basic payment initiation. Features like recurring payments, payouts, data analysis, and instant settlements can make a big difference for your business.

Some open banking platforms provide analytics tools that give insights into customer behaviour, helping you optimise your offerings and marketing strategies.

Ease of integration is key. Platforms with APIs, plugins for popular e-commerce platforms, and no-code options make setup faster and simpler.

Ensure the platform complies with regulations like PSD2 in Europe and offers strong fraud prevention tools. Security should never be compromised.

The payment flow should be smooth and user-friendly. Look for platforms that prioritise fast and intuitive checkouts.

Consider transaction fees and whether the platform offers flexible pricing based on your transaction volume. Avoid hidden costs that can eat into your margins.

Key Benefits of Open Banking Platforms

Open banking platforms bring a host of benefits to merchants. Here’s what you can expect:

• Fewer Abandoned Carts
  Frictionless payments mean customers are less likely to drop off during checkout.
• No Chargebacks
  Since payments are authorised directly by the customer, there’s no risk of costly chargebacks.
• Improved Cash Flow
  Instant settlements give you faster access to your funds, helping you manage your business more effectively.
• Customer Trust
  The use of bank-level security builds trust with your customers, encouraging repeat business.

Success Story: A UK retailer saved 25% on payment costs and increased sales by 15% after switching to open banking.

Why Open Banking Is the Future of Payments

The shift toward open banking is undeniable. Businesses that adopt open banking platforms are better positioned to meet demands for speed, security, and convenience.

Traditional card payments come with high fees, delays, and risks like fraud and chargebacks. Open banking addresses these issues head-on, offering a modern solution that benefits both merchants and customers.

FAQs

1. What is open banking?

   • Open banking lets banks share data securely with approved companies, making payments faster and easier.

2. How does open banking help businesses?

   • It lowers costs, speeds up payments, and improves security.

3. Is open banking safe?

   • Yes, it uses secure systems and customer approval to prevent fraud.

4. Are there any downsides to open banking?

   • Some challenges include setting it up and explaining it to customers.

5. Where is open banking most popular?

   • Europe leads the way because of strong rules like PSD2.