At the start of October, we hosted a lively panel discussion on the ‘Future of Payments’ with payment experts Amit Mallick, Global Open Banking and APIs Lead at Accenture, and Siamac Rezaiezadeh, Director of Product Marketing at GoCardless. The discussion (which you can still watch on-demand here) delved into the growth of open banking and its profound impact on businesses, why the future lies with account-to-account payments, and how businesses are already benefiting from adapting their payment strategies.
Whilst we answered a lot of audience questions live, there were a few that we ran out of time to discuss. However, Siamac and Amit have taken the time to go through them all and we’ve put together their insights for you in the Q&A below. So if you're interested to know what’s on the minds of payments experts at some of the world's largest corporates, read on!
Does open banking have payment restrictions that could make it off-limits for certain sectors?
Amit: No specific restrictions as long as your account is set up to do a particular type of payment (e.g.: the account can only transfer £10,000 in a day). The bigger challenge is that with pure open banking there is no reversal of payments – you cannot do chargebacks or refunds as of today but standards are already evolving to allow that, and some platforms can help merchants get around those limitations.
Siamac: Not strictly speaking no, but some banks and PSPs will have different attitudes towards risk that will mean certain industries won’t be prioritised or will be restricted. One limitation is the size of the transaction, which may be bank and payer dependent. The chargeback point is very interesting. Some PSPs are looking at this as a benefit to merchants, others are looking at this as something that needs to be addressed to drive adoption amongst payers.
Is there a risk that the payer experience could become too frictionless, removing a natural point of reflection in payments?
Amit: SCA regulation will manage the friction. The challenge today is that SCA creates too much friction and the right exemption processing rules will maintain the balance. Ideally, it should be intelligent friction management with step-up and step-down rules depending on context and risk.
Siamac: The big conversion vs risk trade-off reframed as experience vs security/safety. There needs to be a balance. I think the idea is to have a good amount of friction upfront so the payer is clear on what they are doing, but make that experience as streamlined as possible - few clicks, clean and clear information, plugged into authentication that is easy to manage. I think bank debit does this well already, so there is plenty to learn from this existing bank-based payment mechanic: clear sign-up, then regular reminders that you are signed up for example.
What is the current approach for addressing concerns on fraud for push payments initiated via API?
Amit: Industry is already addressing fraud in multiple ways. First through the confirmation of payee here in the UK, and second, through biometric authentication during payment.
Siamac: I think Amit is right here, push payment initiation has authentication by design, that’s made easier by individual bank usage of things like biometrics.
Will PSD3 impact the speed at which consumers adopt open banking?
Amit: PSD3 has been talked about for a few years and I think it is just the natural evolution of PSD2 with extensions in scope. Whether it will be called PSD3 or Open Finance or Embedded Payments is still a matter of debate.
Siamac: Thinking about payer adoption, I think the biggest two levers are a) an effective way to think about consumer protection; and b) market adoption - the more people see options to pay by bank, the better. I don’t think you necessarily need PSD3 to drive either.
How do you imagine FTSE 50 companies will use open banking?
Amit: FTSE 50 will use the data coming in from banks to drive new use case propositions. For example, large retailers can assess open banking data to make Buy Now Pay Later decisions and make payments.
Siamac: Purely from a payments perspective, there is no reason any large enterprise shouldn’t be considering how to add pay by bank into the mix. B2B invoices are a perfect use case, as are many consumer use cases.
What does the use case for open banking and invoicing look like?
Amit: UK and SEPA Request 2 Pay standards are great examples of digital invoicing and collection journeys embedded right into payments flows.
Siamac: I think there is a simple use case. Right now when people pay a single invoice by bank transfer, it typically means taking that invoice, opening up your bank account and manually sending a payment by entering the recipient's payment information, entering the amount and hitting send. This can be optimised via open banking. By way of example, Instant Bank Pay by GoCardless enables the payer to click a link on the invoice, that link would take them through to their bank account, they authenticate, the payment details are already populated so all they need to do is hit pay. This reduces friction for the payer and makes it more likely the merchant receives payment for their invoice on time, with better visibility of the payment status as well.
Do you guys have any thoughts on the role of retail PoS payment terminals in the future? Can software and QR codes, combined with a digital wallet with bank account aggregation, eventually bypass terminal hardware?
Amit: Brick and mortar is a very real possibility, and is already seen evidence of adoption in Asia, especially in China.
Siamac: Absolutely. All you need to do is move from offline to an online payment page via e.g. a QR code and you are there.
Credit cards: Talking about the next era of payment experience, how do you imagine a cardless payment system?
Amit: We already are seeing this with the emergence of wallets and super apps in Asia (e.g. WeChat).
Siamac: Ultimately, if you were going to build an online payment system today, it wouldn’t revolve around pieces of plastic. It just wouldn’t. It wouldn’t include card expiry, it wouldn’t include something designed for PIN entry, and it wouldn’t include entering card numbers, expiration dates or a CVV. It wouldn’t include tools like account updater to attempt to manage expired cards. It wouldn’t include all the intermediaries that are needed to make cards work online. It would include transferring money from one store of value to another, with a single connector, whereby there are fewer opportunities for failure, better security, and fewer intermediaries taking their cut. It would be an enabler, not a cost. A payment system that moves money from one account to another is where we are heading - and ultimately what GoCardless is building.