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What is Open Banking?

Open Banking has 2 main functions. Account information services, and Payment initiation services.

Open banking Account information services. (AIS)

Open banking AIS (Account information services) allows you to give access to third parties so they can see the information in your bank account.

The companies that might request this access do it using the open banking API. This is a network that was built because of the PSD2 implementation throughout the banking sector in the EU.

What data can you share with Open banking AIS.

You can share all the data generated in your bank account.

  • The time, amount, and destination of all the transactions in and out of your account.

  • The information regarding any scheduled payments that you might have set up. (direct debits and standing orders)

What are Open Banking Payments (PIS).

Open banking payment initiation services are transactions initiated by third party providers accessing the Open Banking API.

Payments use the faster payments service, are virtually instant, and are direct from the end user to the merchant.

In terms of ecommerce what are the benefits for the merchant?

Fast. Instant access to funds. The revenue from the sale is passed directly to the merchant.

Secure. Fraud and chargebacks are eliminated. Your customer’s banking app is responsible for correctly identifying their customer, and for gaining irrefutable authorisation for the transaction.

Strong Customer Authorisation is built into the payment flow. SCA becomes the responsibility of the customers banking app rather than the merchant. (https://www.fca.org.uk/news/statements/deadline-extension-strong-customer-authentication)

Cost Effective. Costs are per transaction and lower than traditional card services.

Improved UX, better conversions. The customer does not need their card handy. They don’t need to input any numbers. The journey from payment decision to completed transaction is streamlined down to 2 clicks: the purchase button, and the confirmation button within the banking app.

Innovation and disruption. Open Banking will bring new products and business models. It will reduce costs for merchants because the traditional providers will need to react.

What are the benefits for the consumer?

Open banking payments are very convenient for the consumer. The consumer does not need to input card details or remember pin numbers. The service flow is fast and frictionless.

The ease of use and the security offered by their banking app means that there is a very rapid take up of Open banking payment services.

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