New data from the Government’s Office for National Statistics (ONS) reveals that consumer spending among Brits has held up well this winter, despite waning consumer confidence and inflationary pressures. Despite this, it is too soon to conclude that the economy will bounce back as suggested by the International Monetary Fund (IMF). Consumers will undeniably still look to make informed purchases and remain considerate about their spending habits. It is more important than ever for businesses to ensure they offer a seamless buying journey to ensure customers can spend with ease and control.
Cart abandonment remains a major thorn in the side of businesses, especially when most root causes are preventable. There are varying user experience factors influencing why customers ultimately drop out before paying: a lack of choice around payment methods, having to re-enter bank account details and long waiting and page loading times. However, another significant underlying concern is security and a lack of trust.
James Hodgson is the Chief Product Officer of Payit by NatWest, a leader in open banking payments technology. In this article, he delves into the common misconceptions both businesses and consumers may have about open banking payment methods and how embracing such technology can help prevent cart abandonment, offering a more seamless customer experience.
Enabling quicker settlements with lower fees
Since its inception, open banking has sought to bring high value and significant benefits to all players in the finance industry, alongside consumers. For merchants especially, its many benefits include lower fees, greater security, higher conversion, and quicker settlements.
According to Forbes, in the UK there are now 7 million SMEs and consumers actively using open banking. Across Europe, the number of users is expected to grow to 63.8 million in 2024, particularly gathering pace within the retail sector.
As more businesses who transact online begin to integrate open banking payments, the more consumers will come onboard and help accelerate its mainstream appeal.
There is only so much friction a customer will tolerate before dropping out of a transaction; open banking payments can help minimise this. With no need for manual input of bank account details, businesses can transform the buyer journey, minimising re-directions and facilitating transactions with speed and ease. In turn, this can actively help to prevent cart abandonment and increase conversion at checkout, recapturing lost transactions.
Easing the burden of data with safer transactions
Access to personal data is often a top concern for consumers, fuelled by fears that online transactions can ultimately be unsafe and unsecure. According to UK finance, more than half (58%) of people admit they feel uncomfortable when entering their financial data online to pay for goods and services, creating a barrier for online businesses. However, merchants can avert this anxiety by adopting open banking solutions that do not require them to access customer bank account details.
The payments industry is tackling this by offering consumers and businesses new ways to collect and send payments online and in person. Single-use mobile payments, such as those that generate a link or QR code to receive payments instantly from customers, are safe to use. They have no access to a user’s login credentials, and do not store or share any of their personal bank account information. These methods allow customers to make instant online payments, resulting in a safe, simple, and fast payment experience for users.
It is worth highlighting that faster payments with less authentication could result in increased cases of fraud, therefore, enabling some friction along the way or slowing certain payments down can ensure all necessary checks are completed beforehand. With 93% of adults in the UK projected to use remote banking by 2031 (UK Finance 2022), the need to protect payments is paramount for payment providers.
For added peace of mind, Confirmation of Payee (CoP) checks can also help in the fight against fraud and scams. The functionality is designed to help stop fraud and prevent accidentally misdirected payments by checking whether the name of a payee’s account matches the correct name and account details. CoP can also play a pivotal part in reducing operational costs, ultimately improving the digital journey for customers and the user experience businesses are offering as they strive to maximise conversions.
Greater control and clarity over finances
The encryption embedded in open banking technology ensures that consumers’ data is safe and secure, and the technology enabled by APIs provides users with real-time connectivity to their account and transaction data.
Despite contrary beliefs that open banking strips users of consent when it comes to sharing data, it instead puts them in control. It enables users to view their bank account balance prior to completing a transaction, providing them with greater clarity and control over their finances. In addition, users can be aware of how their data is being used, how they can control it, how it is being stored and how the provider is regulated. Many fintech and paytech solutions are adopting a proactive approach in letting the customer know all about their financial data and encouraging them to engage with it. Promoting data transparency gains trust among the users, giving them confidence that they are in control.
Equipping consumers with a transparent view of their financial situation before making a purchase adds greater flexibility and can effectively influence their purchase behaviours and journey, helping to prevent ‘regret’ purchases.
At their core, open banking payments seek to build safe, transparent, and trustworthy relationships between banks, consumers, and businesses by providing fast, efficient and secure services. Consistent cash flow and convenience can go hand in hand, as long as businesses work to minimise user friction, without compromising the overall customer experience and online security.