How safe are open banking payments?

There’s a very straightforward answer to this question: very. It’s worth unpacking, however, why shoppers might have reservations – and why they really have nothing to worry about.

Let’s say you make most of your payments with a debit card, which facilitates the transfer of funds from your bank account to a merchant’s account (via a complex process of data verification and transfer between the card processing network and the issuing bank, inclusive of fraud checks).

Shoppers like debit cards because they’re a) used to their convenience and b) they’re one stage removed from their bank account. They feel safe. And, of course, they are – to a point. But one of the problems with debit (and credit) cards is fraud, which takes two forms: card-present and card-not-present.

Card fraud is a big problem

Card-present fraud is using stolen or counterfeit cards at point of sale or to withdraw cash. Card-not-present fraud is making online payments using card details acquired from phishing scams or data breaches. In 2019, the value of these transactions from cards issued in the Single Euro Payments Area totalled €1.87 billion. Let that sink in for a moment.

Open banking payments have the potential to eliminate card fraud, for the simple reason that you don’t share your card details at the checkout. The magic of encryption and tokens allows you to pay directly from your bank account – with the payment details pre-populated, ready for your approval – without sharing your bank account information. With no credentials inputted or shared, fraudsters are left with nothing to target.

Again, this is worth quantifying. Between 2012 and 2018, e-commerce payment fraud – dominated, of course, by card transactions – increased by 240%. At an industry level, airlines account for 46% of all fraudulent transactions, with retail and gaming also suffering from unacceptably high volumes of card fraud. The situation simply isn’t sustainable.

Inherent security equals greater convenience

Strong Customer Authentication is among the measures tackling this ever-growing problem, but it’s resulted in an additional step for shoppers – such as approving a push notification from their bank whenever they initiate a payment, or having to enter a one-time verification code.

Open banking payments, by contrast, naturally meet Strong Customer Authentication requirements. By logging into your bank’s app or online banking to make a payment, often with biometrics, you’re confirming your identity. Conclusion: with inherent security comes greater convenience, and that’s great news for conversion.

Putting customers in control

So, why might shoppers question the security of open banking payments, especially when you consider that, unlike cards, bank accounts can’t be stolen or skimmed? Quite simply, paying from your account feels new; a bit exposed, even.

But, when you give a regulated third party like Volt permission to initiate a payment on your behalf, you’re in control. You can revoke access whenever you want. Information is shared via secure APIs, meaning you’ll never be asked to input personal credentials. Further, paying from your bank account means benefitting from bank-grade security.

Data tells us that shoppers have no security concerns once they’ve tried open banking payments. In fact, 80% of first-time users make repeat purchases within the same month – which shows that, as well as valuing their security, customers also appreciate open banking payments’ speed and convenience.

An extra layer of security

We’re not naïve enough to suggest that open banking will end online payments fraud. For businesses, it will always be a problem – that’s just the world we live in. We’re passionate, however, about dramatically reducing its impact.

That’s why we developed Circuit Breaker, open banking’s first dedicated fraud prevention solution. It gives businesses the power to identify and block suspicious transactions, using rules tailored to their needs. You can find out more about how it works here.

If you’re a shopper, give open banking payments a try next time you see Volt at the checkout – and see for yourself just how safe and easy they are. If you’re a business, perhaps it’s time to give your customers a faster, safer way to pay.