Open banking is a relatively new and revolutionary technology that is transforming the world of payments right now, becoming increasingly popular. Besides, open banking is definitely there for the long run, so financial service providers should integrate
its technologies into their business models. This article explains what open banking is, what makes it successful, and how it can substantially boost your revenue when used in conjunction with a payment orchestration platform.
Open Banking: What is it?
Open banking is a technology that allows banking information to be shared with third parties using application programming interfaces (APIs) by which banks and financial institutions provide access, use, and sharing of their data to regulated providers.
Since the banking industry has become more open to its clients, the doors have been opened for new companies to enter the market. These companies leverage the data in innovative, helpful ways.
The main purpose of open banking is to provide customers with better financial services. Open banking technology allows transactions to be processed faster and more securely worldwide while giving customers more flexibility in managing their finances through
third parties. So, how has open banking revolutionized the banking industry?
With open banking, the financial services industry has vastly expanded its business offerings by providing innovative, user-friendly, and instant payment options;
Business owners use open banking for managing payments to automate processes that were previously handled manually, in this way saving their time and money;
Clients appreciate the convenience of open banking and the advanced fintech services the companies deliver using it.
In essence, open banking benefits everyone involved. As of now, its technology is still shaping and has the potential to deliver even more promising results. Especially when we consider open banking to be used jointly with a payment orchestration platform
- multi-acquirer payment software that contains cutting-edge features for transaction flow optimization and revenue increase.
Open Banking: The Rise
It is still early days for open banking technology. However, both merchants and payment providers are already embracing it. Numbers confirm it: The Open Banking Implementation Entity (OBIE) report states one million people start using open banking every
Maybe you have not noticed it, but open banking is already influencing our daily lives, made mandatory for European banks by Payment Services Directive 2 (PSD2). PSD2 is a European regulation for electronic payment services that mandates European banks to
provide easier access to account information and transaction data of customers to account information service providers and payment service providers. And with open banking now being mandatory in Europe, it will not be long before it extends to United States
So, what is the key to open banking success? For customers, it is a technological response to today's demands for quick and convenient payments. For merchants, open banking provides real-time monitoring and intelligent routing of transactions. Also, open
banking is driven by both PSD2 and the General Data Protection Regulation (GDPR) in Europe and the UK.
On top of that, some experts have suggested that open banking will evolve into Open Finance in the nearest future, allowing third-party data exchange to reach a much broader range of financial services and products.
Revenue Opportunities from Open Banking & Payment Orchestration
Open banking technology, using APIs, enables banks and FinTechs to provide a better experience to their customers, generating more income, while payment orchestration platforms have embedded technologies to easily adopt new payment methods, mitigate risks,
save on the processing fees and achieve higher conversion rates. In unity, these two are the driving force behind frictionless payments that generate more revenue for business owners. However, there is more to come:
Better customer experience
Since banks will be the suppliers of customers' information and transaction data for open banking, such as bank card usage, and demographic information, it creates an opportunity for a better understanding of customer behavior that leads to a better payment
When used with payment orchestration, the customer experience is strengthened by the payment routing technology, which helps route transactions to payment channels most likely to approve them, thereby minimizing the chances of declines.
Conversion rate increase
Among the main benefits of open banking is its convenience, which leads to a higher conversion rate. For instance, with open banking, the customer does not have to enter his payment data over and over again, and the payment process takes much less time.
Plus, a hassle-free payment experience encourages customers to return.
Payment orchestration achieves a higher conversion rate due to cascading technology. Whenever a regular payment solution fails a transaction for some reason, with payment orchestration, the transaction will be sent to another payment provider to process
and achieve a successful result. Consequently, the payment is processed smoothly, resulting in higher conversion.
Flexible payment options
Third-party providers will be required to be able to offer flexible payment options through digital channels, thanks to open banking. Based on APIs for authorized transactions, banks will authorize payments originating from multiple digital and social media
and e-commerce sites, ensuring seamless payment processing. Also, payment orchestration offers many traditional and alternative payment methods available via one integration to the platform.
Deep analysis of customer behavior
In order to predict the likelihood of purchases, you need to know the customers' financial behavior. As a major advantage of open banking, it provides insights into customers' spending patterns across multiple expense categories through access to bank account
data. Also, based on API data discoveries, FinTech companies can personalize and tailor their financial products.
Payment orchestration platform also has many tools for deep analysis. The advanced analytics of the platform collects data from all payment providers used by the merchant in one unified dashboard. The technology analyzes the geography of buyers and their
payment preferences, identifies the cause of a transaction failure, etc.
The word “open” regarding banking may seem unsafe as if customer payment information is visible to everyone. However, open banking aims to prevent unauthorized access, transfer, and management of information. APIs are protected by industry-specific standards
such as PSD2, requiring technical authorization, authentication by the user, and consent.
Payment orchestration platform technologies play a crucial role in fraud and chargeback protection. Having in-house anti-fraud modules and external risk scoring providers, the platform identifies and selects fraud prevention tools based on specific risk
profiles, providing merchants with effective fraud prevention.
The bottom line
Open banking has significantly facilitated the financial industry's digital transformation, and it is only the beginning of modern technology development. We see that instant, stable and error-free payments are no longer just a desire of a few but a necessity
for all. It creates the prerequisites for the emergence of innovative payment solutions like payment orchestration platforms. In combination with open banking, they radically alter the concept of efficient payment acceptance.
After all, both open banking and payment orchestration are with us for the long run due to their innovative, user-friendly, and secure payment technology. So, if you want to be among the businesses already benefiting from the latest payment technologies,
you need to hit the road.