Payment Methods Report 2022: the benefits of Open Banking & A2A payments are now visible
Leading Fintech online magazine The Paypers just released its latest Payment Methods Report. This 7th edition offers a detailed look at the latest trends and developments in the payment sphere, and at the new technologies that enable such new methods. An important part of the report is dedicated to Open Banking and Account-to-Account Payments, underlining its growing adoption.
In her introduction to the report, Anda Kania (Lead Editor for Payments and Commerce, The Paypers) explains that “the increasing number of digital shoppers prompts industry players – especially merchants, PSPs, payment methods providers, and fintechs – to push innovation forward in a bid to offer superior customer experiences”.
Moreover, she highlighs that 3 main trends have been defining e-commerce for a couple of years: CONVENIENCE, SECURITY & SPEED.
Flexible and secure payment methods
The report notably focuses on the rise of Open Banking and Account-to-Account Payments. First and foremost, The Paypers’ experts make the distinction between A2A payment methods (the typical bank-to-bank payments without the involvement of a card) and Open Banking payments (similar payments, but they do require consumer consent to share their data with TPPs).
As the report explains, we are living in a world where innovation paired with regulation has cleared the path for merchants and banks to decrease the influence of card schemes on the payments ecosystem.
Real-time payments have become the end-goal of technology providers, banks, governments, and users alike.
According to Worldpay’s Global Payments Report 2022, 20 European countries are part of the centralised instant SEPA credit transfer (SCT Inst) scheme: as of June 2022, there are 2,360 registered SCT Inst scheme participants (PSPs employing the scheme) representing a share of 61% of all SCT adherents (i.e. 3,872) in all SEPA countries (and 68% for the EU and 71% for the euro area only). The report also underlines: “even though A2A payments as a practical concept is still far away from sweeping the world in terms of monopoly, instant payments and direct bank transfers are invariably at the moment the status quo of A2A.”
Open Banking expert Andréa Toucinho (Director of Studies, Prospective and Training Partelya Consulting) is also taking part in the report, discussing the specific Request-to-Pay topic. She explains: “this innovation, linked with e-invoicing and B2B digitalisation, is not yet a reality in all European countries, but many experts have already identified some key applications linked with the evolution of the market”.
According to her, the combination between Request-to-Pay and an instant payment is seen as a key marriage to foster electronic transactions in countries where traditional payments are often privileged. Andréa Toucinho highlights: “above all, instant payments will become the ‘new normal’ in Europe.”
Innovative payment habits
In a way, digital-first generations (Gen Z and Millennials) are driving the market and dictating which payment methods will meet success in the near future. They favor and advocate Q-commerce (standing for quick commerce), live commerce and real-time payments.
Discussing real-time payments, Gareth Lodge (Principal Analyst, Global Payments, at Celent) underlines that “much of the value of real-time payments comes from their efficiencies: many real-time payments are irrefutable once they leave the sending bank. With irrevocable, good funds, the recipient can use the payment when they see it.
“This offers a more streamlined experience than other payment types that may be cancelled, recalled, or reversed. Real-time payments also allow payments to be made, and importantly, received, at any time, 24/7”.
He adds: “Also, real-time payments are a single message that can facilitate greater levels of automation and speed throughout an entire transaction, using APIs that can be embedded in a business value chain to drive everything from order placement to payment, release of goods, and shipping, for example.”
New challenges arise for merchants, backed by solution providers and banks: how to build new experience before, during and after the checkout.
Source: The Paypers