TrueLayer YouGov study: Retailers are embracing 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
Nymbus enters strategic partnership with Plaid
Nymbus, a leading provider of banking technology solutions, has partnered with Plaid, a data network powering the digital financial ecosystem, to more instantly authenticate and fund customer bank accounts for financial institutions.
This new integration will allow Nymbus bank and credit union clients to securely onboard new users in a matter of seconds, which in turn translates to more active and engaged banking experiences. Plaid’s data network enables consumers to connect their financial accounts at over 11,000 institutions globally to more than 5,000 digital finance apps, including leading payments, investing, and budgeting tools.
What are the benefits of the integration?
Benefits of the Nymbus and Plaid integration for financial institution customers include:
- Improve user identity verification and reduce fraud.
- Instantly authenticate and link members’ bank accounts.
- Streamline ACH transfers between any bank or credit union in the US.
- Access and analyse comprehensive transaction data.
- Validate real-time account balances to protect against overdraft and enable account pre-funding.
“As more consumers than ever before rely on digital finances for their everyday lives, financial institutions need to meet their customers where they are while supporting safe and reliable money management experiences,” said Sarah Howell, Chief Alliance Officer at Nymbus. “Our expanding network of partners are important contributors to Nymbus’ combined portfolio of the technology, people and process available to quickly innovate with new routes to market and revenue streams.”
Continuous growth and expanding partnerships
Founded in 2015, Nymbus has continued to grow. Most recently the company has closed a new round of financing led by the Curql Fund. The US$5 million investment will be used towards Nymbus CUSO and accelerate a shared commitment to breakthrough technology for ensuring continued growth and stability for the credit union community.
Nymbus CUSO was founded in March 2021 to help break through barriers to growth, and its mission is to connect credit unions with trusted fintech offerings that both simplify technology delivery and enable new digital revenue opportunities.
Last year Plaid set a goal to move 75% of its traffic to APIs by the close of 2021, calling it “one of our top priorities as the industry moves full-steam ahead toward a fully digital financial system.”
Recently it has announced an open finance partnership with Capital One, a digital finance innovator, and the successful completion of its migration to the Capital One API. They have also completed or have in-motion data access agreements with major US financial institutions, including U.S. Bank, JPMorgan Chase, Wells Fargo, and others.