Perfect Partners: Payment Orchestration and Open Banking


Just as open banking is opening up financial services, payment orchestration opens payment systems up to embrace change and opportunity, allowing merchants to incorporate open banking into their payment ecosystem with ease.

Open banking is no longer a new idea, and acceptance of the concept is growing in all sectors. Meanwhile, payment orchestration – a single integration layer that creates unified control over multiple payment channels – is making it easier than ever for merchants to adopt new payment services. Here is why the combination of the two could be the catalyst for a frictionless payment experience.

From getting groceries delivered within the hour to booking a taxi with the tap of a smartphone, consumers are now accustomed to faster, more tech-focused services in all areas of their lives – and paying for these services is no exception. This demand has forever changed the relationship consumers have with their banks, creating a new environment of open banking.

See also: Open Banking: Has Technology Outpaced Regulations?

The rise of open banking

Open banking came about in 2013 as part of the European Commission’s revised PSD2 proposal. This recommended that banks allow third parties to access account data and initiate payments. It’s already become popular in other parts of the world; South Korea, for example, has more than 20 million users. Here in the UK, the number of users increased from one million in January 2020 to three million in 2021. Today there are more than five million active UK users.

Download Now: Building Real-time Location Applications on Massive Datasets

It’s easy to see why. It gives consumers the speed and convenience of instant payments, while for merchants, transactions are intelligently routed and monitored in real-time. This means they can analyze performance and use the data to cut costs, boost acceptance rates and simplify operations via automated reconciliation.

Furthermore, it uses a customer’s existing online banking app to initiate and authenticate transfers, so they do not need to enter their account information online. This prevents sensitive financial details from being held by the merchant, resulting in a more secure process for both parties.

Nevertheless, security is still considered one of the main challenges facing open banking. The lack of standardized technical standards combined with complex internal tech systems could make the process prone to corruption and fraudulent activity. It is also potentially more difficult to prove who was at fault in the event of a theft due to the complex chains of data access open banking creates.

Perfect partners

But the advantages do outweigh the risks, particularly if open banking is used in conjunction with payment orchestration, which can help mitigate the risk of fraud.

When confronted with the risk of fraud, merchants may be tempted to apply blanket fraud prevention tactics to every transaction. But a systematic approach enabled by payment orchestration is more effective. It allows transactions that fit specific risk profiles to be identified and choose the most appropriate fraud prevention tool.

This, of course, benefits the business, but selectively, rather than universally, adding friction points for the purposes of fraud prevention, the customer also benefits from a better payment experience.

Payment orchestration and open banking do, in fact, make perfect partners. Just as open banking is opening up financial services, payment orchestration opens payment systems up to embrace change and opportunity, allowing merchants to incorporate open banking into their payment ecosystem with ease.

The open access to customer data merchants then get provides valuable insights into consumer behavior, which in turn allows them to create tailored offerings and initiatives. And because open banking as a payment method can be completed in just three clicks, it means a frictionless experience for shoppers that can reduce cart abandonment.

Transforming the payment landscape

Merchants are acutely aware that around one-third of consumers will abandon a transaction if their preferred method of payment isn’t available and are feeling the pressure to cater to the payment preferences of their local market.

This, coupled with the addition of payment orchestration, could well be the catalyst for the more widespread adoption of open banking services. Open banking has the potential to transform the rules of finance and financial transactions. It takes the power away from the banks and gives both merchants and consumers greater choice. A report from PwC predicts £7.2bn of revenue opportunity will be created by open banking this year, with 71% of SMEs and 64% of adults expecting to adopt it for e-payment transactions in 2022.

Payment orchestration can help accelerate the mass adoption of open banking payments by making it simple for merchants to incorporate it into their payment system. This will ultimately lead to lower payment transaction fees whilst reducing the need for card payments, direct debit, and standing orders.

Because of the opportunity it presents, and with payment orchestration now making it easier to adopt, now is the time for businesses to fully embrace the opportunities open banking has to offer.

Download Now: Building Real-time Location Applications on Massive Datasets
Kristian Gjerding

About Kristian Gjerding

Kristian Gjerding is CEO of CellPoint Digital, which is a fintech leader in payment orchestration. The main solution is a powerful omni-channel Payment Orchestration Platform that optimizes digital payment transactions from cards or alternative payment methods and accelerates the deployment of new payment options. CellPoint Digital also provides an end-to-end digital commerce platform to airlines that masters the entire customer sales cycle and maximizes the conversion rate.

Leave a Reply

Your email address will not be published. Required fields are marked *