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That’s a good point, Ketharaman, if we compare the US regulation with the UK/EU regulation. In the USA Open Banking is more industry-based, whereas in the UK/EU it’s regulatory-based. When an industry in the US sees that there is a demand for opening data, it focuses on developing that product. Whereas in the UK/EU the regulator decides first that they open data and then the industry should adjust to these regulations. 

Definitely agree with you, James. As an industry, we have to focus on the value that Open Banking can bring to both businesses and end-users. For businesses, the advantages are more or less straightforward (lower costs, SCA, no chargebacks, data about the users), whereas users need an explanation on why they are better off using their bank instead of a card.  Consumers are creatures of habit and are used to paying with their cards, or other traditional methods and would naturally assume that it is a more secure way to pay. We are not claiming that Open Banking will replace payment cards, but it will be interesting to see how the industry adopts Open Banking and its inherent advantages.  The industry is moving fast, creativity is key, so coming up with innovative products that consumers can use without being afraid, in this case, to use their bank, either for payment or for information. There is still room for innovation with Open Data.

Thanks for your comment, Melvin. In terms of public information, there are many articles and white papers from various sources on how Open Banking can change the industry and benefit consumers. The UK is counted as one of the strongest and most advanced regions in terms of Open Banking adoption, so naturally, there is a lot of focus but I do agree that there is more education needed at the consumer level. Security is absolutely key and of paramount importance to end-users, this is where OB can reduce fraud; a user always confirms their payment via Strong Customer Authentication using Face ID, Touch ID, or unique passwords. When confirming the payment, the user is redirected to their own online banking app within a secure environment, it is important to note that only regulated providers are allowed to initiate OB payment.

For merchants who are considering Open Banking, there are 2 major factors that make it an attractive proposition – Costs & no risk of chargebacks. During the height of Covid, we saw an increased risk of chargebacks as well as fraud. Online shopping fraud statistics show that global losses from payment fraud reached $32.39 in 2020 – three times more than in 2011. 

That's the beauty of the payments industry - there's lots of choices out there, and each merchant can assess the various providers with respect to their individual needs!

Hi, thank you for your comment and apologies for the late reply. Ultimately, I think we agree regarding this point. I would just like to say that for scenario #1, i.e. CI COF, it is a specific feature that allows card details on the payment page to be saved and applied every time a subsequent purchase is made (particularly when CVV/CVC will be requested). Therefore, we are defining CI COF as a payment initiated by the cardholder using COF, so that the cardholder does not need to re-enter payment card details.

Based on your examples, it would appear that you’re mostly referring to the US model. Would that be the correct assumption to make? I must admit that for the basis of this article, I used my (EU-based) company. Consequently, we’re talking about a context in which both PSPs and Acquirers would be responsible for opening Merchant Accounts on behalf of their clients. If I’m not mistaken, Stripe also follows this model. 

Another thing that I should’ve specified in my article is that it really comes down to what the merchant is trying to achieve. As per my points, there are services beyond simply processing payments that could make working with a PSP or an Acquirer (as opposed to, say, a payments facilitator) worthwhile.

Please feel free to contact me on email at paul@ecommpay.com to discuss further!

This is a tricky one. It's heavily dependent on the business model of the companies you've named. Merchant Aggregation is fraught with risk, because no KYC means that merchants are effectively anonymous. Unfortunately, that translates to a lot of illegal activity and miscoding. Acquirers aren't particularly keen on taking on that risk, because they're the ones to get penalised by Visa and Mastercard if it turns out their retailers are selling unlicensed pharmaceuticals instead of candles, for instance.

Hi Maximiliaan, thank you for your comment. I'm familiar with the model, and I believe that with open banking this type of transactional commerce, which reduces friction on a number of levels, will become ever more popular over time. I do expect that there will be a period of adjustment - a learning curve, if you will - while consumers adapt to accessing their bank via a retail site with a simplified username and password, which may initially seem concerning. However, an additional layer of security, such as text 2FA, should allay any fears they may initially have.