Tuesday, May 3rd, 2022
Prepaid cards, mobile payment services, virtual currencies, internet-based payment services, and the list goes on. Understanding the new payment methods, their risks, and opportunities is an absolute must for companies today. It literally is the difference between keeping up with trends or falling behind competitors.
What has brought about this change? The ever-evolving digital transformation and the current health situation have all had a big impact on the world of payment. The result has been a record number of transactions processed in the last two years and forever-changed payment processing expectations.
The Age of Open Banking
Many startups and tech giants have entered the ring, offering cheaper and more efficient solutions that provide customers with a seamless experience. The European market is welcoming these changes with open arms. According to Ramzi Dziri, Open Banking Product Manager at LUXHUB, one of the top goals is to stimulate competition and innovation within the European market.
“One of the main goals of PSD2, along with giving access to account information to more entities, was to enable the initiation of payment directly from a bank account, and therefore to stimulate competition – and eventually innovation – within the European market,” says Dziri.
The European Commission recently expressed its ambition to take things a step further and embark on the journey to enable instant payments in Europe in the years to come. In fact, it has aspirations to turn the continent into a global leader in the sector (currently dominated by U.S. giants).
Commissioner McGuinness highlighted that “instant payments are seen as a game-changer. The benefits go beyond speed and round-the-clock availability. When combined with new add-on services – such as ‘request to pay’ – they can support innovative business models, like payment initiation services.”
Massive Opportunities of Open Banking
One of the biggest opportunities of open banking is digital account-to-account payments. They not only provide customers with transparency, security, and ease of use but also provide lower fees – by roughly half. Online merchants also gain access to more customers.
According to the World Bank Global Financial Inclusion survey, just 46% of participants in Europe own a credit card. Meanwhile, 95% have a bank account. Utilizing open banking provides companies with a valuable opportunity to reach more customers and even widen their audience.
Finally, it helps mitigate serious risks for customers through a much more secure solution. “It reduces the overall number of steps to pay, increasing the conversion rate, thanks to a unified flow and a seamless experience. Payment actually becomes an integrated part of the customer experience,” explains Dziri.
The bottom line: this revolution in the world of payment has many benefits. And it’s one business of all sizes that should be aware of and take steps to jump on board.