Open banking for PSPs

How can PSPs seize the open banking opportunity?

When PSD2 took effect in 2018, payment service providers (PSPs) were presented with a sizeable opportunity: offering their clients a new payment method defined by ease, speed and security.

Open banking payments enable shoppers to pay via instant bank transfer, minus any manual data entry or additional Strong Customer Authentication (SCA) checks. With their value expected to grow by 2,800% between now and 2026, it’s become imperative for PSPs to integrate them.

Implementing an open banking solution

While open banking payments are characterised by simplicity, the infrastructure underpinning them presents three very specific challenges:

  • Payments depend on reliable connections to bank APIs. How can these connections be standardised and scaled across markets?
  • Open banking payments are account to account: with no intermediaries, how can they be tracked and reconciled?
  • Shopper UX. How can your clients’ customers be reassured by open banking payments’ safety, and encouraged to use them?

These explain why PSPs have been reluctant to implement open banking themselves, and why they rely on the technological expertise of Third Party Providers (TPPs) like Volt. Rather than building a complex proprietary solution, they can use Volt’s single API to access:

  • A global real-time payment network with multiple connections to bank APIs across 25+ markets
    • This enables us to smart route payments based on the strongest connection at any given moment
  • An orchestration engine that tracks payments from initiation to receipt, and which facilitates refunds and payouts
  • A best-in-class checkout that can be embedded within your clients’ websites, and which 80% of first-time shoppers return to within one month

Volt's payment orchestration layer

What does open banking mean for your clients?

Our functionality comes with tangible benefits for your clients. Global merchants, for example, can seamlessly accept instant payments from customers in multiple continents – without having to worry about multiple integrations or region-specific solutions. Businesses of all sizes can expand into markets where bank transfers are preferred to card payments (which is true across much of Europe) – at minimal cost. Retailers can offer refunds (and, owing to faster settlements, dispatch goods faster and with more certainty). Card fraud and chargebacks, which open banking payments inherently negate, are eliminated.

Boosting open banking adoption

We understand that PSPs naturally have questions over adoption. What will it take for their clients’ customers to choose open banking at the checkout? Open banking adoption data is broadly encouraging, but how does it translate to an average shopper’s preferences and concerns when they’re at the checkout?

We’ve built two simple-but-effective tools to educate customers at particularly opportune moments. First, a non-intrusive ‘How it works’ pop-up when shoppers consider selecting ‘Pay by Bank’ at the checkout. This teaches them, in one simple visual, that they can check out in just three steps: select your bank, log in to your bank account, approve the payment.

How Volt works: check out in three easy steps

Second, Transformer – a BIN recognition tool that your clients can use to ‘convert’ debit or bank-issued credit card payments into open banking payments. When one of their customers makes a card payment, Transformer recognises who they bank with from the first six to eight digits of their card number. A pop-up then explains how it’s faster and easier to pay directly from their banking app or online banking.

The tool is particularly suited to merchants with high ATVs, who want to offer card payments but also stand to benefit most from open banking payments’ instant settlements and lower fees.

Transformer 'converting' a card payment into an open banking payment

The benefits of open banking for PSPs

If open banking payments are good for your clients (instant settlements, no interchange fees, zero chargebacks) and their customers (a faster, easier and safer payment experience), then what of the benefits for PSPs specifically – beyond the ability to keep their merchants happy by acting as a trusted facilitator and adviser?

The most obvious is that open banking payments help to future-proof your business. They will become a mainstream payment method – for generations. By offering them as an option, you’ll position yourself as committed to serving your clients’ needs – namely reducing their costs and streamlining how they receive funds.

Consider also that open banking, which is underpinned by secure, consent-based access to data, will soon go beyond banking. Shoppers could feasibly share their wider financial footprint with trusted third parties to help them save, get a better mortgage or improve their access to credit. By integrating open banking now, PSPs can be on the front foot when the shift towards productising open finance begins in earnest.

Open banking, it should be said, already goes beyond payments. It’s user authentication, too. By integrating Volt, you’ll give your clients the opportunity to use Verify, our Account Information Service (AIS). This automates and strengthens the process of customer bank account verification, via secure access to bank accounts.

Verify: Volt's AIS solution designed to help merchants confirm customer bank account ownership

A further benefit is that PSPs can present open banking payments in their own brand. Volt offers a grey-label solution that prioritises ‘Pay by Bank’ as the key message, alongside the ability to implement your brand’s colour scheme. When coupled with the handy ‘How it works’ pop-up mentioned earlier, this gives PSPs an important point of difference in a crowded market.

On the compliance side, it’s worth emphasising that, because open banking payments are reliant on secure communications between banks, they naturally comply with regulatory requirements in the UK and EU. This has positive knock-on effects for integration (they can simply be plugged into your clients’ websites or platforms), and for the shopper experience (no additional SCA checks like fingerprint approvals or entering one-time passcodes).

With open banking, then, PSPs can fulfil their duty of offering reliable, inclusive payment options – while providing real choice in a market long dominated by cards. With adoption hitting hockey-stick levels, now’s the perfect time to capitalise. Discover more by arranging a demo.