Guide: How to initiate a payment via Open Banking through the OpenPayd API

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Posted on June 20, 2024
Guide: How to initiate a payment via Open Banking through the OpenPayd API
Open Banking is a positive step towards a future in which customers make payments the way they want - benefitting both themselves and businesses. 
OpenPayd Editorial Team
OpenPayd Editorial Team
June 20, 2024

In 2024, customers want to make payments in different ways. Preferences and expectations have changed, and offering multiple payment options is no longer a ‘nice-to-have’. It’s key to meeting modern customer expectations. 

Enabling customers to ‘pay-by-bank’ through Open Banking is a way to meet this trend, and OpenPayd clients can now offer this to their customers all through our API. 

 

What is Open Banking? 

Open Banking was introduced in 2018, with regulators passing legislation to open up financial services and provide more competition to banking. Previously, banks had the ability to block any third party from viewing a customer’s banking data, or using that data to complete certain actions (such as payments), even if the customer was willing to provide consent. 

That’s no longer the case, and if a customer provides consent to a regulated third party, banks must make that data available to them. What happens next will depend on whether the provider is an Account Information Services Provider (AISP) or a Payment Initiation Service Provider (PISP)

AISPs will use banking data to offer services such as saving and investment advice, accounting and lending. PISPs enable the provider to initiate a payment directly from a bank account, so the customer is not having to enter account details themselves or use a card. 

 

How it works with OpenPayd 

As with all OpenPayd payments, Open Banking is accessible via our API. Once integrated, your customers will have the option to pay-by-bank at your payment screen. This will open a menu which enables them to select their bank and connect with their banking app. They will then see a screen asking them to confirm that all details are correct before authorising the payment. 

They key thing to point out here is that this all happens within your site or app. Customers don’t have to log on to their internet banking and enter details, or get their card from their wallet or purse. It all occurs as part of a single checkout flow. 

When the payment is completed, we send a webhook which informs you that the payment has been completed (or failed, if the input information is incorrect). Open Banking payments are managed the same way as all of your other payments, with the OpenPayd dashboard giving you full visibility. 

 

Why offer Open Banking? 

While Open Banking gives customers the option to use an alternative to cards, which many will prefer, that is by no means the end to the benefits it brings. 

We’ve come a long way since the dawn of online payments, but the checkout experience is still something which is far from mastered. In 2023, the worldwide checkout abandonment rate for eCommerce was 69.99%, up from 59.8% back in 2006.

In the last 20 years customers have actually become less likely to complete their online purchases. Businesses must therefore do everything they can to make that payment experience as simple as possible. Open Banking is a huge step forward in making that happen. 

There are also cashflow benefits to offering Open Banking as a payment method. When customers pay by card, that payment will usually take several days to settle. With Open Banking, the payment can be transferred via Faster Payments and therefore settles within seconds. All businesses benefit from a faster access to their funds, and the more customers that use Open Banking, the easier it is to avoid cashflow challenges. 

Finally, there are also cost savings to be made with Open Banking. Card payments come with acquiring fees, scheme fees and perhaps more depending on the card and provider. With Open Banking you sidestep these fees, cutting your costs for every transaction. 

Open Banking is a positive step towards a future in which customers make payments the way they want – benefitting both themselves and businesses. 

If you’re ready to get started, reach out to us today and we can walk you through embedding Open Banking into your payment journey.