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The Transformative Power of Open Banking for Payment Service Providers

This insightful article on the transformative potential of Open Banking for Payment Service Providers (PSPs) was originally written by Yapily. In the ever-evolving landscape of payment processing, Open Banking is emerging as a transformative force, offering both consumers and businesses a more streamlined and efficient payment experience. PSPs, the key players in this field, are poised to reap significant benefits from adopting Open Banking. In this summary, we’ll delve into ten compelling reasons why PSPs should embrace this revolutionary payment ecosystem.

1) Increase Merchant Retention

One of the critical metrics for PSPs is merchant retention rates. Traditionally, businesses have been burdened with high transaction fees, which can eat into their revenue. Open Banking offers a solution to this problem. With payments made directly between bank accounts, businesses incur only fixed fees for accessing Open Banking APIs and volume-based transaction fees. This reduction in payment costs provides a strong incentive for businesses to remain loyal to PSPs, resulting in higher retention rates.

2) Boost Transaction Volume

By leveraging Open Banking to lower transaction fees, PSPs not only help businesses save money but also encourage them to reinvest these savings in growth and expansion. As a result, PSPs can expect to process more transactions, thereby increasing their revenue. Real-world examples, such as Ordo and Yotta Pay, have witnessed substantial growth in transaction volumes after adopting Open Banking.

3) Improve Conversion Rates

Consumers today expect fast, seamless, and secure payment experiences. Slow and outdated payment processes can frustrate customers, leading to cart abandonment and decreased profitability. Open Banking payments, with their efficiency and security features, can significantly improve conversion rates. Some businesses have reported checkout conversion rates increasing by 250% after adopting Open Banking.

4) Optimize Fraud Prevention

Security is paramount in payments, and businesses value it greatly. Open Banking payments come with Strong Customer Authentication (SCA) to ensure secure and reliable transactions. This not only reduces fraud but also minimizes unjust chargebacks. Crezco, for example, achieved a high net promoter score after adopting Open Banking, demonstrating strong satisfaction and confidence in the technology’s security.

5) Offer Faster Settlement

Slow settlement processes have been a pain point for businesses. Open Banking, with its real-time processing using Faster Payments, provides a solution to this challenge. Businesses can receive payments instantly, improving cash flow management and enhancing their financial stability. Trilo, for instance, reduced the time for merchants to receive funds from up to seven days to just five minutes.

6) Maintain Market Share

PSPs play a crucial role in handling global payments, ensuring security, accommodating payment preferences, and enhancing customer experience. However, there’s room for improvement. Open Banking not only addresses these areas but also offers enhanced security features, such as customer-controlled payment data, which can enhance a PSP’s credibility in the market.

7) Refund Within Hours

Refunds can be a cumbersome process, especially when manual authorization is involved. Open Banking, with its virtual accounts, enables PSPs to streamline the refund process, allowing businesses to issue refunds quickly and efficiently. Money is credited to consumers’ accounts instantly, providing a better customer experience and reducing potential disputes.

8) Embed Payment Experiences

Embedded payments, facilitated by Open Banking, offer seamless and convenient payment experiences for consumers. Businesses can integrate the payment process within their software or website, reducing friction in the buyer’s journey. This not only improves the payment experience but also drives customer loyalty and retention.

9) Gain Deeper Insight

Open Banking provides valuable data insights by tracking buying behavior. PSPs can better understand their customers’ needs and create personalized payment solutions, enhancing loyalty and retention. Additionally, Open Banking helps identify and mitigate fraud risk by monitoring transactions in real-time.

10) First-Mover Advantage

Early adoption of Open Banking offers PSPs a significant competitive advantage. By being at the forefront of this technology, PSPs can set an example of how Open Banking improves the payment experience for both businesses and consumers. With businesses and consumers showing a growing interest in Open Banking, PSPs can position themselves as pioneers in this transformative landscape.

In conclusion, Open Banking presents a wealth of opportunities for Payment Service Providers. By embracing this innovative payment ecosystem, PSPs can not only improve their own operations but also provide businesses and consumers with faster, more secure, and efficient payment solutions. The advantages are clear, and PSPs that lead the way in Open Banking stand to benefit immensely in this evolving digital payments landscape.

Click here to read the full article and explore the transformative power of Open Banking with Yapily.

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