By Dan Scholey, COO of Moneyhub

Introduced in January 2018, Open Banking handed ownership of financial account information and data from the bank or building society to the customer.

Technology is rapidly transforming not only the way that the banking sector is operating, but also the way that individuals and businesses are able to interact with each other. Payments are a key part of this – being able to pay directly from one account to the other can mean faster and easier transactions for both customers and businesses. While businesses can also benefit from lower costs as well as the ability to see the full, end-to-end customer journey.  

There remains a real worry among users about the security, speed, and reliability of this new payments architecture. The key to overcoming these hurdles is improving understanding – here a few of the most prevalent myths.

The costs of payments is negligible

Technology has continued to transform the payment space. The domination of the global players a few years ago was successfully challenged by the likes of Paypal and Stripe. But while this competition brought prices down and made the process more simple, Open Banking now posing a threat to the dominance of these players, by fundamentally undermining their business model.

Utilising Open Banking, fintechs can vastly reduce the costs that businesses pay per transaction. Processing card payments can be expensive for businesses with the bigger players such as American express charging up to 6% per transaction. Whilst smaller ‘challenger’ options such as Stripe and Paypal can offer less than 2% plus a transaction fee on large transactions this can add up. For example, on a transaction of £20,000 that still amounts to more than £300. Open Banking means that card payments are bypassed altogether, thereby substantially reducing costs. For example, providers such as Moneyhub charge just 1%, capped at £1 and even less for transfers.

Mobile payment technology is less safe and puts customer data at risk

Open Banking payments gives consumers greater control and visibility over their payments. It is more flexible than direct debits, and allows the user to revoke privileges with minimal fuss compared to direct debits.

With encrypted credentials, ISO27001 certification and security of the highest standards, data is always safe.

In addition to defining the technical standards, Open Banking / PSD2 also clarified the legal framework too, meaning it is more clear than ever that the Banks have to protect the user from Fraud and Erroneous payments and ‘make good’ in the first instance. 

It’s going to be more confusing for customers

Open Banking is stimulating innovation, reducing the amount of friction for users. ‘Request for Payment’ technology enables the payee to send a payment request through the consumer’s bank rather than using a debit or credit card. The consumer is then able to choose which of their accounts is used for the payment. With their account balance updated in real-time, it makes managing money much more straightforward. 

Switching payment provider is complex

Many businesses will stay with the current providers in order to avoid the hassle of moving but inertia can severely hamper a business’ growth and flexibility. Indeed, as already discussed mainstream providers can be expensive despite seeming to be a simpler choice. 

And switching providers doesn’t have to be complex, in fact the most difficult part is often researching which provider to switch to, and even then, there is help for businesses available such as the Merchant Advice Service. 

Contractual obligations must be considered before switching, such as early exit fees, as well as ensuring that disruption to the business during the changeover is managed. 

Whilst switching providers may initially seem like a minefield, there are structures in place to make the process as easy as possible for businesses, and taking that step could help save a business a significant amount of money.