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Home » Fintech » How a regulatory directive turned into a catalyst for innovation

Duncan Robbins

Open Banking Delivery Partner, Endava

Consumers are directly benefitting from a deeper integration of financial services with the entire financial system defined by unprecedented levels of personalisation and efficiency.

Open banking is maturing to a place where financial institutions are no longer defined by rigid and out-dated practices and brands who initially had no connection to the finance space are now redesigning the digital customer experience with this at top of mind.

Moving banks from side-line to centre stage

As banks look to secure their future relevance in the digital economy, open banking has become a key strategy for establishing credibility, developing a footprint in the data economy and creating a steppingstone towards new business models. The advancements in this space have gone beyond CMA requirements for variable recurring payments (VRP) with NatWest Group making made the UK’s first-ever VRP for ‘non-sweeping’ use cases.

While the current requirements for VRPs only apply to sweeping, banks have a new opportunity to deepen their relationship with customers on multiple levels: improving value propositions and customers’ lifetime value, enhancing relevancy and retention and putting their brand back at the heart of their customers’ payment experiences.

Banks have a new opportunity to deepen their relationship with customers on multiple levels.

Merchant focus: improving customer economics

An engaged open banking system and real-time payment rails have contributed to A2A payments evolving as one of the preferred emerging payment methods. They are expected to contribute around 20% of all e-commerce transactions in Europe by 2023. By integrating A2A payments with open banking APIs and multi-factor authentication, businesses can guarantee a frictionless payment experience and directly benefit from decreased fraud and refunds losses without impacting the customer’s checkout experience.

Merchants’ inclination to lower costs and faster settlement capabilities compels higher adoption rates and an added level of appeal is directly tied to the lack of card processing fees that are standard in card networks. Additionally, these instant payment networks can accept both one-time and recurring payments via mobile or desktop use cases.

Everything begins with the customer

Since all business strategy is customer centric, both banking-as-a-service and embedded finance keep the consumer connected to the business until the transaction is closed. In a best-case scenario, customers have a frictionless and convenient shopping experience with the option to engage in banking transactions only when needed.

With embedded finance, there is a collaborative and interactive effort between financial institutions and organisations offering these options where the goal is to ensure a single point of contact with for all financial needs. The symbiotic relationship in turn drives higher value to customers through delivery innovative operational processes through the financial offer.

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