Navigating the 2024 Payment Life Cycle

In this guest blog, Kolleno’s Head of Partnerships, Irina Anichshuk, deep dives into how open banking is transforming the payment landscape and expands on the topics discussed on their recent webinar, which GoCardless’ VP of Product Marketing and Insights Siamac Rezaiezadeh was a guest speaker, ‘Navigating the 2024 payment lifecycle with Direct Debit, Integrated Payment Stacks and Open Banking.’

Recently Kolleno hosted a webinar exploring how open banking is transforming the payment landscape, offering more secure, efficient, and personalised financial transactions. Let's explore the insights shared during this webinar alongside Kolleno’s own experiences, focusing on the integration of open banking with payment systems, the importance of offering multiple payment options, and the resurgence of direct debits as a key payment method.

Open Banking’s Impact on Integrated Payments

Open banking has had a revolutionary impact on integrated payments by enhancing security, reducing costs, and enabling faster settlement times. It combines the reliability of bank payments with the speed of card transactions, aiming to improve the payment experience for both businesses and consumers. However, realising this vision requires collaboration across the banking and financial services ecosystem.

Key Benefits for Businesses and Consumers

For businesses, integrating open banking with payment systems can significantly reduce costs and fraud, while enabling real-time payment confirmations and settlements. Consumers stand to benefit from more secure payments, a seamless user experience, and potentially lower costs.

Enhancing Security and Fraud Prevention

Open banking introduces a "security by design" approach, requiring authorisation through banking apps, thus striking a balance between security and convenience. However, the user experience varies across banks, and the industry is still working towards a seamless authorisation process akin to "card on file" experiences.

Regulatory Considerations

Implementing open banking solutions involves navigating a complex regulatory landscape, varying significantly across regions. The UK is at the forefront, while the EU, Australia, and the US are at different stages of adoption and regulatory framework development.

The Significance of Multiple Payment Options

Offering a variety of payment options caters to diverse consumer preferences, influenced by factors like geography, age, and the nature of the transaction. Multiple payment options can enhance consumer choice and satisfaction, but they also present challenges for businesses in terms of integration and management.

Key Benefits for Businesses and Consumers

Businesses benefit from offering multiple payment options as it leads to increased sales conversion, a wider customer base, global reach, and a competitive advantage. It reduces cart abandonment, offers flexibility in billing, and improves cash flow. For consumers, the key advantages include convenience, financial inclusion, and security. In essence, the availability of multiple payment options creates a more inclusive, customer-centric approach that enhances the overall transaction experience for both businesses and consumers.

Challenges and International Transactions

Businesses face operational challenges in integrating multiple payment systems, such as ensuring seamless data syncing and managing currency conversion to provide cost-effective transactions for international customers.

Role of Data Analytics

Data analytics plays a crucial role in optimising the selection of payment options, helping businesses understand customer preferences, identify trends, and improve conversion rates.

Direct Debits’ Resurgence in 2024

There’s been a recent resurgence of direct debit as a preferred payment method, driven by consumer preference for bank account payments, particularly for recurring transactions. Technological advancements and the rise of the subscription economy have highlighted the benefits of direct debits, including higher payment success rates and lower overall costs.

Technological Enhancements

Advancements in technology and automation have made direct debit transactions more efficient and reliable, with features like payer name verification and the integration of open banking to enhance security and reduce fraud.

Benefits and Risk Mitigation

Direct debits offer significant benefits for businesses, including reduced involuntary churn and lower transaction costs. To mitigate risks associated with unauthorised transactions and customer disputes, businesses can leverage tools and strategies like payer name verification and intelligent fraud detection.

Looking Forward

The webinar underscored the continuous evolution of the payment landscape, with open banking, integrated payment systems, and direct debits playing pivotal roles. Innovations and regulatory changes will further influence these trends, emphasising the need for businesses to stay adaptable and informed.

As the financial landscape evolves, these innovations promise to enhance the efficiency, security, and personalisation of payment systems for businesses and consumers alike.