Features and functionality

What open banking features are available and which do you need?

An open banking payment, at its core, allows a customer to pay for something online straight from their bank account.

That could be buying a product from an online store, or topping their account up with funds on a wealth management app, pension app or iGaming platform. This is one of the core aims PSD2 was designed to deliver on — a secure and instant way to make payments online without a physical plastic card.

That’s the minimum. As open banking evolves, there will be more functionality available throughout the lifecycle of a payment. From the moment a website visitor decides to become a paying customer, along with any verification needed, to the point where they request a payout, withdrawal or even a refund, these features can improve the overall buying experience.

When choosing your provider, think about the following features and how important they are to your new payment experience.

Account verification

In industries like iGaming and financial services it’s important to confirm your customer’s identity and the ownership of their bank account. Account verification via open banking connects your business to your customer’s bank account to fetch financial information via secure APIs. This validates that your customer owns the bank account in question, without the need for manual bank statement uploads or micro deposits, vastly reducing the chances of fraud or the risk of a customer making a payment to an incorrect account.

Refunds

Refunds have been considered the Achilles’ heel of open banking, as the in-built solution, known as reverse payments, has a poor customer experience. Reverse payments introduce unnecessary friction into the user flow and need to be approved by someone in your business. To meet customer demands, some providers, including TrueLayer, have built on top of basic open banking infrastructure to make automated, instant refunds possible — all within a closed-loop system. In fact, 81% of shoppers expect a refund from an online purchase in a week or less.

Payouts and withdrawals

Whether it’s to withdraw their funds from an investment app or iGaming provider, or even to process the sale of their car, the ability to pay your customers instantly is another way to improve the end-to-end payment experience. Instant bank payouts and withdrawals also build trust. Almost half of current investors (46%) said they were likely to switch providers for instant withdrawals, while 37% would also consider depositing more money if they could withdraw instantly. Not all open banking providers process payouts, so be sure to ask.

“

We know from our customers’ feedback that having instant access to their funds is a key motivator to use our brands. Customers can deposit money instantly so why not be able to withdraw instantly too?

Natalie Dunne, Director of Payments

Sweeping

Known as ‘me-to-me’ payments, sweeping in the UK enables the repeat transfer of money between two accounts belonging to the same person. If your business involves helping people budget, save or invest, the ability to easily transfer money between accounts they own on a recurring basis is highly beneficial. As UK banks are required to build variable recurring payment (VRP) APIs, sweeping is quickly becoming a feature your provider could offer.

Please note: this functionality is not yet mandated by regulators outside the UK.

Recurring payments

While VRP has only been mandated for sweeping in the UK, several UK banks are choosing to go beyond what is mandatory and build APIs that will enable more kinds of recurring payments. If your business would benefit from offering subscription payments, recurring invoices, instalments or payments that are typically handled by card-on-file, open banking VRPs could become a powerful alternative to continuous payment authorities (CPAs), card-on-file, and direct debit.

Payment statuses

Knowing whether a payment has 'completed' or 'failed' — or 'sent' in the case of a refund or withdrawal — lets you quickly identify customers having payment issues. Combining this with specific error codes for why a payment has failed makes rectifying payments problems much quicker and easier. Statuses are also helpful to update the end user, removing any ambiguity about whether they have successfully made a payment.

Information and insights

Having a more complete view of your customer’s financial data — think balances, transaction history and credit limits — can improve your product offering. Account information services (AIS) can be used separately to payments, but when combined can enable powerful functionality like affordability checks, VIP customer segmentation and savings & investment insights.

Plus: a clear plan for emerging use cases and technology

Open banking is becoming a widely-used payment method across Europe, with an estimated 28 million users (more than 6 million of those are in the UK alone), the technology and regulation is changing and evolving all the time. Your open banking provider should be building and testing solutions for these new use cases, especially where an emerging use case could benefit your business.

How many APIs do you need to integrate with?

If your brand needs a selection of features, you may need to integrate with several APIs. For example, if there is a separate API for each product and each market, it can quickly multiply the time and resources needed, possibly derailing or prolonging the integration process.