25th November 2023
A government report in the UK has highlighted that Open Banking can help improve both person-to-person bank transfers and provide an alternative to the card schemes, but only if the lack of consumer protection and commercial arrangements are addressed.
The Future Payments Review stated that “there is currently no consumer dispute resolution process for Open Banking transactions, and we believe this will be a barrier to adoption if not addressed. Likewise, the current commercial arrangements do not create the conditions for Open Banking to thrive in a healthy way, with costs and benefits misaligned. If these issues can be addressed, we are optimistic about the scope for innovation and believe that the UK can use Open Banking to capture a world leading position once again in these areas”.
It recommended that consumer protection on payments made via Open Banking is enhanced with a minimum form of dispute resolution. This will create the trust and security that consumers need to adopt Open Banking solutions. It was also pointed out that without sustainable financials, it is hard to see that Open Banking can thrive over the long term.
Card payments
It was also mentioned that many merchants and retailers “are frustrated by the costs of taking card payments, and the lack of viable alternatives”. The review stated: “Although there is some evidence that card costs to merchants have increased, we did not see data which indicates that costs are out of line with relevant international comparators. However, the UK is almost unique in that merchants have no established digital alternative to cards with which to take payments from consumers. In most other countries, there is a convenient alternative process which enables consumers to pay merchants at a lower cost than cards. We believe that this absence of choice is one of the key drivers of dissatisfaction among merchants. Currently, the only digital alternative to cards are bank transfer processes which, if accessed via online banking, involves entering a name, sort code and account number. This bank transfer process: a) is a bit clunky and typically takes over a minute to complete, b) lacks consumer purchase protection or dispute resolution process and c) does not have attractive commercials to scale.”
By Ritesh Gupta, Ai Events
