How do Open Banking Payments affect customer experience?

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Here’s an overview of how Open Banking Payments can improve each step in the online customer journey.

How do Open Banking Payments affect CX?

Key takeaways:

  • A superior online customer experience is a key differentiator for nearly any business
  • Open Banking Payments offer the potential to improve the entire customer journey
  • Only a full-service Open Banking provider can help merchants realise that potential

Open Banking offers massive potential for improving online customer experience. That potential starts with the payment experience, which then generates a positive ripple effect through the entire customer journey.

Yet, it is crucial that merchants understand that Open Banking technology only provides a foundation for innovation. Actually realizing the full potential of Open Banking requires a much wider set of capabilities beyond payment initiation services.

Fast and easy payments are just the beginning of Open Banking’s potential

In the EU, the Payments Service Directive 2 (PSD2) requires all banks to allow and support authorised service providers to initiate payments. In parallel, the British Open Banking Implementation Entity (OBIE) has standardised bank APIs across the UK.

Understanding the differences between Open Banking Payment providers isn’t always easy. We’ve created an in-depth breakdown of the various capabilities, but there are a few basic things merchants should know.

Essentially, there are full-service providers (like Trustly) and there are providers that offer comparably limited services. Very few providers can support rapid payment settlement and cross-border payments.

Additionally, many Open Banking Payment providers don’t support payouts, withdrawals or the disbursement of funds. So, without a full-service vendor, merchants miss out on improving some crucial points in the customer experience.

With a full-service provider, merchants can strengthen their position at each step in the online customer journey from acquisition to conversion to retention. Here’s how >>>

For businesses that accept payments online, Open Banking provides the possibility to strengthen their position at each touchpoint in the customer journey

Offering customers’ preferred payment methods can boost acquisition

The connection between alternative payment methods and acquisition may not be immediately obvious. It all comes down to meeting the new customer’s preference.

Our research shows that when people can use their preferred payment method, they will choose one vendor over another — and consumer preference for Open Banking Payments is soaring.

So, if you can communicate to your potential consumers that you offer an Open Banking option, you can clearly create a positive impact on your acquisition rates.

When it comes to acquiring customers in multiple markets, supporting the local payment method of choice in the local currency can be a true differentiator.

With a full-service provider, merchants can accept cross-border Open Banking Payments without the complexity connected to cards or other payment methods. However, that can’t be achieved with all Open Banking API-integrators.

The supplier’s multinational bank network is not the only factor to consider here. In order to avoid unexpected costs for the end-consumer, an Open Banking Payment provider should have the capability to offer local liquidity management.

Friction-free, automated payments drive conversion

By minimising friction in the payment process, Open Banking Payments have a powerful effect on conversion. Manual entry of data such as card numbers, invoice numbers and the details of manual bank transfers can be eliminated. Data entry is completely automated, thus minimizing human error, and in turn, reducing customer service demands.

As more and more people have access to this digital-first experience, Open Banking Payments are rapidly gaining in popularity over cards. According to OBIE, Open Banking Payments in the UK are expected to grow 130% in 2021, and by more than 460% between 2021 and 2024.

Payment authentication, the last step in conversion, is another area where Open Banking holds a serious advantage, especially considering the EU’s requirements for Strong Customer Authentication (SCA), which was implemented at the start of 2021.

Now, when European consumers want to make card payment online, they must first enter the card details and then perform 2FA, usually with a code sent to a mobile number via SMS.

In contrast, with Open Banking Payments, consumers can use fingerprint or face recognition biometrics to confirm their identity and approve transactions in one seamless flow, again reducing friction from the conversion process.

But to ensure conversion, the provider’s Open Banking solution needs to work consistently. Using a provider that relies solely on API callouts to initiate payments creates a risk that transactions might not be processed due to technical glitches or API downtime.

A provider that can also offer a fallback system employing modified web interfaces (MCIs) in addition to APIs ensures that customers can complete their purchase, even if that customer’s bank does not yet deliver robust Open Banking APIs. This flexibility also helps merchants ensure a future-proof solution as technology and regulation evolves.

Faster payouts, refunds and disbursement increase satisfaction

In general, Open Banking Payments are just a payment initiation service and have no control of the settlement. However, a full-service provider like Trustly that is always in the flow funds can easily execute payouts. These hassle-free payouts are executed with one click in a back office application

According to our 2021 survey of e-commerce businesses across 10 major European markets, timely processing of refunds are a crucial factor in ensuring a superior customer experience.

Slow refunds drive irritated customers to contact customer support. In that same survey, 25% of e-commerce merchants said that handling refunds is one of their stiffest challenges. For UK merchants, nearly one in five (19%) support calls are related to refunds.

The benefits of offering payouts in conjunction with Open Banking Payments is not limited to refunds. Financial institutions can differentiate by offering instant disbursement of funds related to loans, investments or insurance claims.

Similar to e-commerce businesses, financial institutions spend massive amounts of time and money supporting customers who are waiting for their funds. With instant payouts, customer service can be removed (or at least reduced) from the customer journey.

For institutions such as lenders or insurance underwriters, sometimes all the customer really expects is for their funds to be delivered. So, the ability to offer instant payouts is a clear differentiator that supports customer satisfaction and loyalty.

Reliable, secure solutions foster customer loyalty

Improving the payment experience helps bolster consumer trust, which supports conversion and customer satisfaction. In turn, happy customers lead to reduced contact with customer service, long-term loyalty and increased lifetime value.

Providing a trustworthy experience is an important part of gaining and maintaining consumer confidence. According to our research, when a consumer decides to try a new payment method, security and regulatory oversight are two of their biggest concerns.

Working with an Open Banking Payment provider that is dedicated to delivering a robustly secure solution will give your customers peace of mind and keep them coming back to your platform over the long-term.

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