TrueLayer YouGov study: Retailers are embracing open banking

TrueLayer and YouGov reveal the latest consumer and merchant trends that are shaping the future of the UK open banking

A new, collaborative study from Europe’s leading open banking platform, TrueLayer, and YouGov, the global public opinion poll portal, has revealed several new trends that are changing consumer habits in terms of payment solutions and the ecommerce market.

The report shows that ecommerce sales have seen the equivalent of five years growth in the past 12 months in the UK alone.

To meet the demand, retailers have had to optimise their online presence to attract and retain customers as the sector becomes increasingly competitive. Data shows that the checkout experience has become a ‘core focus’ for retailers. 

Payment solutions are driving customer choice

The report also showed that online shopping behaviour is being strongly influenced by currently available payment methods. 48% of those surveyed said the payment solutions offered by online outlets were a determining factor in their choice of retailer. 

Data suggests that credit cards and debit cards are still the leading payment method, taking up 50% of purchases over £200. But other payment solutions including digital wallets such as Apple Pay, PayPal and Google Pay, are rising in popularity - amounting to 38% of respondents using these methods as their primary payment service.

However, stats also suggest that the strength of card usage is acting as a ‘catalyst for the next evolution of the checkout journey.’

In a recent article, Francesco Simoneschi, CEO of TrueLayer, predicts that open banking payments will replace debit cards as the default method of payment by 2027. He writes, "The problem is cards, which weren’t designed for online and have been retrofitted into current online payment flows. Newer digital approaches, such as Google Pay or Apple Pay, paper over those cracks but don’t change the fundamentals.

"That’s why open banking payments will become the default way to pay online, replacing debit cards in the next five years. The consumer benefits are simple: It doesn’t cost anything, but provides them with a lot more.

"Open banking removes the need to remember card details – biometric authentication on a mobile device provides instant and secure payment. There’s no need to update stored details if a card is lost, stolen or expired," concludes Simoneschi.

The numbers revealed new payment solution trends:

  • That card payment costs are merchants’ biggest pain: processing fees, fraud and chargebacks associated with card payments are hurting merchants. Almost half of the merchants surveyed (49%) rated the high cost of payments in their top two pain points with existing payment providers.
  • Almost a third (31%) said it was their biggest pain point. Meanwhile, 36% of merchants rated high fraud and chargebacks in their top 2 pain points, while 1 in 5 merchants (20%) said it was the #1 pain point.
  • Merchants with a high average order value report the highest overall chargeback costs. 38% of merchants with an average order value greater than £500 report costs of £100-500k a year on chargebacks, while 11% reported costs in excess of £500k.
  • That open banking payments are the future of the checkout: 74% of merchants are planning to offer instant bank payments, via open banking, as part of their long-term strategy. This corresponds to consumer attitudes, with almost two-thirds (63%) of shoppers would be comfortable paying by open banking, particularly for vehicles, car rentals, flight tickets and sporting equipment.  The research revealed that shoppers aged 24-34 are most comfortable paying by instant bank transfer (77%), followed by those aged 35-44 (74%).
  • That security is the shopper’s biggest concern: 60% of shoppers said they have abandoned an online basket because they were worried about a lack of payment security. The challenge for retailers is to strike a balance between authentication and seamlessness, and this comes with offering consumers methods that they’re comfortable with. There’s also a generational difference with shoppers under 45 preferring to authenticate via biometrics, while shoppers over 45 prefer one-time passcodes / SMS.
  • That refunds are a loyalty opportunity for merchants: 67% of shoppers - rising to 88% for purchases of between £500 and £1,000 - said the time taken to receive a refund is an important factor affecting their decision of whether or not to shop on that website again. 81% of shoppers expect a refund from an online purchase within a week or less. 

Up to 85% of merchants also said that offering instant refunds would improve customer retention and loyalty. But at the same time, they are struggling to meet expectations, and 32% received frequent complaints about slow or lost refunds.

Card payment methods are falling short

Speaking about the new data, Ossama Soliman, Chief Product Officer at TrueLayer says that debit and credit cards are falling short because they weren’t designed for digital commerce at scale. “Traditional bank transfers are also flawed, taking shoppers away from the checkout and forcing them to manually copy over transaction details. The result is poor shopper experience, low conversion, and billions in potential revenue lost.”

Soliman agrees that the opportunity – and need – to create the ultimate online payment experience is huge, but said it clashes with the reality of incumbent payment methods, with merchants facing the challenge of mounting costs from transaction fees and chargebacks.

He explains. “That is why so many are examining instant bank transfers via open banking to deliver digitally-native payments with conversion rates up to 40% higher than cards at a cost that is much lower than cards.

“That combined with the ability to instantly process refunds and payouts, offers an opportunity to merchants to differentiate themselves through an improved end-to-end payment experience. And shoppers are ready to embrace it, having become comfortable with instant transfers in their everyday financial lives.”

He adds, “We are undoubtedly entering the next phase of evolution at ecommerce checkout that is a win for merchants and shoppers.”

Image credit: TrueLayer CEO Francesco Simoneschi, TrueLayer


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