There’s been a lot of hype about Open Banking since the advent of the EU’s second Payment Services Directive (PSD2) in 2018. The aim is to promote the development of innovative online and mobile payments, partly by opening up Application Programming Interfaces (APIs) to third-party providers. This will improve the range and quality of products on offer to consumers.
So far, though, PSD2 has not lived up to the hype: in the UK, one of the world’s Open Banking leaders, three-quarters of UK consumers surveyed in late 2018 were unaware of Open Banking’s benefits. However, this also creates a huge opportunity to stand out.
Where PSD2 really matters
At Trustly, we think open Open Banking APIs are just part of the PSD2 story. We’re cutting through the PSD2 hype to help merchants deliver real customer benefit through sophisticated Payment Initiation Services (PIS). PIS essentially allow consumers to transfer funds or pay for goods and services straight from their bank account without the intermediary of, for example, a card. That said, it pays to remember that not all payment initiation services are the same. When selecting a PIS provider, there are a number of factors to consider.
Initiation-only is not enough
Basic PIS providers simply perform a “push” of funds from the customer account to the merchant account. However, you should never assume that once a payment is initiated, it is completed. Initiated payments may fail fraud processes along the payments chain or come up against poorly performing legacy systems. Or the consumer simply forgets the initiated payment and withdrawals cash.
As cash withdrawals are prioritised among batched payments for settlement, there is a risk that the account balance becomes too low to allow the execution of other initiated payments. Whatever the reason, the result is a failed payment for your customer, frustration and a decrease in loyalty at a time when competition in the digital space is soaring.
Crucially, basic PIS services do not have a refund or withdrawal mechanism built in. A 2019 study we commissioned on European consumer attitudes suggests that fast and simple refunds would generate increased loyalty – 58% of respondents would be shopping more frequently if offered instant refunds. And let’s face it, seamless refunds are basically a hygiene factor in today’s payments landscape. When it comes to refunding functionalities for merchants, it’s also important to remember that basic PIS providers can’t offer payouts.
What you need in PIS
As a merchant looking to take advantage of PSD2 and generate increased loyalty in a competitive environment, you should be adding instant deposits and refunds/withdrawals to your product portfolio.
The PIS partner you choose should also be able to manage all services associated with instant payments – from risk management to automated refunds, faster settlement and payment reconciliation. The latter is often overlooked, but reconciliation is vital for the core payment functionality.
Imagine simply receiving a list of payments and manually having to match them against initiated transactions. Given today’s global economy, you also need a partner that can perform across borders and continents.
Trustly has spent the past ten years working to deliver fast, simple and secure transactions directly from customer accounts to merchants. Since we are in the flow of funds, we differentiate from basic PIS providers by offering instant deposits and withdraws, as well as industry-leading reconciliation. And best of all, our service requires you to undertake only one integration process.
Likewise, consumers don’t need to authorise our service every time they use it. They simply use their bank login details to access their accounts normally. That reduces friction for consumers and enhances loyalty to your brand.
At the same time, consumers get the fast, simple and safe payments they are looking for. Today, Trustly helps drive innovation in online payments together with various big brands including global players like Revolut, Swedish challenger bank Avanza, and financial well being platform Dreams.
To find out how Trustly’s collecting PIS services can grow your payments volumes, improve customer loyalty and boost your margins, visit us at www.trustly.net
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