Fintech Event: How the payments sector is driving open finance
By Teamspirit on Wednesday, 20 April 2022
Will 2022 see the death of card payments?
That was the crux of our second event this year held on Thursday 21st April in conjunction with the FSF, where we were discussing payments and how they are at the vanguard of accelerating open finance, which is set to revolutionise the banking sector.
With thanks to Schroders for hosting and to our panel of payment innovators, at the vanguard of realising open finance:
• Laura Xu, Product Manager, TrueLayer
• Siamac Riez, Head of Product Marketing, GoCardless
• Suzanne Homewood, Enterprise Sales Director, Moneyhub,
• With apologies from Peter Janes, CEO and Founder, Shieldpay Group (Covid)
An illuminating discussion where we began with referencing that for many consumers the magnitude of the forthcoming change was the headline news in January here in the UK, that Amazon would no longer accept Visa card-based payments on their platform. With merchant appetite driving much of the initial demand, this is set to continue as higher card fees as a result of the UK having exited the EU continues to bite – with estimates from the British Retail Consortium showing processing of cross-border transactions is costing retailers and extra £100k every day.
Although eventually resolved in the UK, this was not the first time that Amazon has threatened to unseat the status quo, for instance with the extra surcharges that they had already passed on to customers in Australia and Singapore. And it’s when merchants such as the retail behemoth Amazon throws a spanner into the system of its second largest European market after Germany, that we sit up and listen.
Proof of the appetite for new payment options can be seen in the success of the high-profile unicorns such as Wise, Revolut and Klarna, who promote moving money around more easily, more securely, and at less cost. And that movement is increasingly contactless. For context, UK Finance stats reveal that in Dec 2021 there were 2 billion debit and credit card transactions in the UK, with contactless payments accounting for 56 per cent of all credit card and 69 per cent of all debit card transactions. Contactless card transactions were up 76.5 per cent more than December 2019.
Many in the payments industry are arguing that card payments online are in fact broken – because, designed originally for the offline world, they actually result in a poorer user experience, with high transaction cost and risk of fraud.
2022 is predicted to be the year that card payments will expire, as Governments are driving change through regulation to allow open banking APIs to enable a shift towards account-to-account (A2A) transactions that, by removing the friction of the current re-authentication of the current card-on-file payments, which will offer more convenience, control and security.
Questions included the drivers of change for new payment solutions. Not only are these transactions cheaper for merchants but they help better understand and manage payment failures. We moved on to discussing the nature of the better customer experience at the heart of the revolution that’s being promised, removing friction points and providing instant payments and payouts. The panel shared real life examples of how the customer experience is being transformed for the better.
Of course, the conversation moved to regulation, particularly with the desire to increase open banking for payments from around 8% of the UK population as of January 2022, to have 60% usage by September 2023. This was seen by the panel as a steep challenge. The criticism of the Competition Markets Authority (CMA) and challenge by the x20 open finance fintech signatories, asking for the market to move faster to open up competition and a need to simplify the mesh of regulators involved. With future oversight of open banking now to be jointly led by the FCA and the Payment Services Regulation (PSR) the panel welcomed regulation as it’s helped get the panel to their current status but agreed further regulation was required. Barriers to adoption included merchant uptake, with a need for the innovators to prove the seamless integration across existing partners. Incentivisation of banks for adoption was also mooted as critical to speed up the freeing of data to allow open finance to be fully realised.
Looking ahead the panel highlighted how friction free the consumer experience will be particularly – consider the simplicity and ease of the Amazon Fresh shopping experience – particularly when you consider wearing usables. The panel agreed that it will take a major retailor such as Amazon or tech innovator such as Apple to make open banking mainstream. Some of which is already in play.
A fascinating morning made possible by the smart insight and generosity of comment by our panel experts. Cards really do feel old school.
If you’d like to discuss how payments and open finance are changing the fs landscape and the implications for your brand and communications, please contact us at hello@teamspirit.co.uk.