Payment service providers (PSPs) keep money moving and get people and businesses paid, yet in the increasingly connected economy, mounting demands for seamless experiences and omnichannel transaction management are pushing PSPs to explore new solutions.
Chief among these is open banking. PSPs see the potential for improving their services across the spectrum of offerings, as is spelled out in the Open Banking: The User’s Guide For PSPs, a PYMNTS and TrueLayer collaboration.
Per the report, “PSPs can benefit from open banking … by utilizing it as a payment method. PSPs can then enable merchant clients to accept payments from customers via instant bank transfer. Such open banking applications are wide: PSPs can offer open banking as a plugin for mobile apps, platforms and marketplaces, and they can deliver an open banking API that allows these same companies to tailor payments options to their customers’ particular needs.”
The report is packed with real-world use cases proving the effectiveness of open banking on PSP operations, and in other critical areas like ever-stricter compliance in global finance.
Read more: Open Banking — The User’s Guide For PSPs
Facilitating Payments With Less Friction
Noting that “PSPs must enable client merchants and marketplaces to remain in compliance with know your business (KYB) and strong customer authentication (SCA) standards, regardless of where their business clients and customers interact,” Open Banking: The User’s Guide For PSPs illustrates several ways that PSPs are turning to open banking “to facilitate payments services and explain how PSPs can leverage open banking features to scale their businesses.”
Using examples including stock trading and wealth management, online marketplaces, iGaming, crowdfunding and more, the report states that “PSPs often face complex regulatory, customer experience and product performance challenges when they work with merchants and marketplaces that have customers around the globe. Many PSPs are now turning to open banking tools to remove frictions from transaction processes and offer their clients a new, high-performing payment option.”
On the booking iGaming front, for example, PSPs use of open banking is setting loose a slew of new payments, faster and more secure possibilities.
“PSPs with iGaming clients can help them power new, innovative entertainment experiences. Open banking payment options enable iGaming providers’ players to fund their gaming accounts for both their first purchases and any subsequent ones. These payments settle almost instantly, and they are much cheaper than cards or alternatives for the merchant. In addition, open banking payments are more secure, meaning these companies encounter less fraud.”
See also: Open Banking — The User’s Guide For PSPs
Granular Insights and Safer Credentials
Reducing friction is at the heart of PSPs use of open banking, as is the need for faster payments in more modalities that also pass muster with stringent global AML/KYC regulations.
“An open banking API can empower PSPs’ clients to instantly authenticate their B2B clients or customers through their bank accounts, enabling them to offer frictionless payment services through any platform, app or storefront. Businesses using an open banking API can also authenticate users and complete onboarding processes in seconds rather than minutes or even days,” per the report.
That’s in stark contrast to other methods, where “verifying user credentials and authenticating bank account access can be slow and prone to overzealous security flagging or unrecognized genuine fraud attempts, especially when human error trips up time-sensitive data entry tests. PSPs need to provide the highest levels of security for their B2B clients through their products, but poor user experiences arising from slow transaction processing or unnecessary security flags ultimately damage client relationships.”
Open banking also enriches analytics capabilities for PSPS, with the report stating that “PSPs with open banking technology are able to share meaningful insights on aggregate consumer behaviors, enabling clients to modify goods or service offerings based on up-to-date consumer preferences. PSPs armed with open banking insights have the knowledge to provide payment products that match their clients’ preferences more accurately and develop new features that will delight their customers.”
Related: Open Banking — The User’s Guide For PSPs