Open banking may still be a vague term for some, and it’s even more so for the average consumer as many still do not fully grasp how it works and why it is a safer choice.
According to the latest consumer survey by ING (via Ipsos) in 2020, although 75% of people are positive about the direct benefits of open banking, only 40% were comfortable consenting to the actual use. They conclude the lack of understanding and trust to be a major factor for the gap between openness and willingness to try this alternative when offered the choice.
At Neonomics, we help you deliver a safe and user-friendly payment option at a much lower cost, but we also want to make sure that you feel 100% confident in how you communicate it to your customers: not only the “hows” but also the “whys”. With that in mind, we have highlighted three reasons why open banking payments are safer for your customers.
1. Card payments, while safe in general, pose a security threat when stolen or exposed.
We as consumers are so used to paying with cards online that we often forget how the process of directly entering our card numbers puts us in a highly vulnerable place against fraudulent acts. Or how inherently risky storing card details and passwords are. Yet we still choose to pay with cards out of impulse as we choose convenience over security.
You may ask, what can possibly go wrong? In fact, it can in so many ways.
You may have noticed that in some e-commerce websites, you are not asked to authenticate who you really are when entering your card number. Without proper authentication and verification, you risk having your card details being compromised and the financial impacts can be quite serious. Open banking payments reduces this risk without impacting convenience.
Additionally, it’s estimated that millennials have on average 17 media and entertainment subscriptions that they pay each month — so if you ever lose your card, it means you must re-register your new card credentials at every subscription site.
In the case of open banking payments, you can simply revoke the consent for an individual service in-app when you suspect misuse. Your bank account is never compromised unlike what happens to your plastic payment companion.
2. Open banking payments — equally convenient but much safer.
On the other hand, the story is much different with open banking payments. We assume you bank your money with your chosen bank because you trust them. Yet, you involve an intermediary agent when paying online — such as debit or credit card — as you want to pay in one go without having to separately enter your bank app or website. When you pay with PIS (Payment Initiation Service) governed by PSD2, you pay directly from your bank account under the protection of your bank’s security and plus something called Strong Customer Authentication (SCA)> They make sure it is YOU who is really making the transaction, and what kind of data & information can be shared with the third-party providers, and for how long. These third-party providers are a licensed Payment Institution and vetted by the banks’ API in real-time when you make payment. An equally convenient but much safer choice. By simplifying the way, open banking is making the whole customer journey less expensive for you and easier and safer for consumers.
3. Under PSD2, retailers never collect any of the security information for financial transactions.
We talked about the apparent risk that takes place when your card is stolen or exposed — but what if you haven’t made any errors yourself and still become the victim of data breaches? In 2019, British Airways was fined £183 million under the General Data Protection Regulation (GDPR) for a security incident exposing card numbers, expiry dates, and Card Verification Value (CVV) codes.You would think a leading global company like British Airways would have a more resilient approach to security, but this is one of the countless examples of organizations large and small succumbing to security failings that expose very sensitive customer data. You bear similar risks with any retailers when you pay with your card online. The good news is, under PSD2, open banking enables your digital transactions to be directly handled within your bank’s website or app for the payment. As banks continue to digitize, you can feel safe that open banking payments will strengthen all stakeholder’s ability to offer a highly secure service to end customers while not impacting privacy or convenience.
The narrative of benefits around open banking payments has been largely shaped around the cost savings to businesses. To be able to encourage more and more consumers to use it, we as businesses should become better at addressing why it’s a win-win for both your business and the customers.
Simply put, consumers want convenience, and they expect security. Open banking payments deliver this in the most robust manner at a much lower cost. At Neonomics, we want to help you inspire your customers, so that the next time they purchase something on your app or website, they will be more willing to choose an open banking payment.