The Missing Pieces of the Open Banking Payments Puzzle – Interview with PW Consultants

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Thierry Leblond from P.W. Consultants discusses the challenges of adopting banking payments and the outlook for this industry

Can you tell our readers a bit about your professional background and the history of PW Consultants?

I’ve been in the retail payments industry since the “last century”. First for the payment subsidiary of Crédit Agricole and for more than 25 years as a consultant, first at EY and now at PW Consultants. With more than 50 consultants and more than 20 years of experience, PW Consultants supports all players in the payments ecosystem (banking, retail, industry, fintech, etc.) in their transformation towards payments adapted to the digital world.

What about Open Banking payments, especially in France? Could you please share some stats and share if these stats are promising?

If we are talking above all about payment initiation for C2B use, the Observatory that we published at the end of 2020 revealed a very strong ambition on the part of merchants to develop this means of payment in ecommerce for cases of use with large baskets. The objective is to overcome the limits of the cards which can block the realization of the transaction and to establish a fixed commission rather than a commission based on the amount of the transaction.

Some players are also finding success by combining their payment initiation offer with a payment link for in-store use, again in the case of large baskets (furniture, etc.).

Unlike the United Kingdom, France does not have consolidated figures on the use of Open Banking, but we note that among our customers, payment initiation (PIS) is very much in the minority (around a few per 1,000) within Open Banking API calls, while the overwhelming majority remain linked to Account Information APIs (AIS).

However, a French fintech like Fintecture uses its PSD2 approval exclusively for payment initiation (PIS) and already claims more than 3,000 customers. Another French fintech, SSP, is multiplying the use cases combining aggregation (AIS) and initiation (PIS).

What are the broader implications for B2B of adopting Open Banking payment?

The adoption of Open Banking in the B2B sector is a real opportunity for companies to improve their internal processes by facilitating daily operations in the areas of accounting, treasury and human resources.

Open Banking payments integration with accounting system vendors allows businesses to have real-time visibility into their cash flow, simplify bill payments or refunds, automate reconciliations (such as invoices and transactions banking).

Thanks to the Open Banking APIs, the HR function can offer social impact services to employees, such as the instant payment of installments, which is very common in the United Kingdom. Finally, the payment of salaries, salary advances or the reimbursement of professional expenses in real time are simplified and secure. Beyond productivity gains, these transformations facilitated by Open Banking contribute to a responsible employer brand, concerned about the needs of employees and modern.

What do you think specifically of France and the challenges related to the deployment of Open Banking payments?

In France, the card remains the most used means of payment for cashless payments with 55% of volumes, ahead of transfers and direct debits (18% each) then checks (5%). The deployment of Open Banking lags behind the UK and the Nordics (in terms of number of TPPs, number of Open Banking APIs).

Since the implementation of the DSP2 RTS, the CNPS (National Committee for Scriptural Payments) and the AFEPAME (French Association of Payment and Electronic Money Institutions) have organized recurring working groups (WG), bringing together the ASPSPs, the TPP and the representatives of the associations in order to work together on the various operational subjects to be clarified with a view to achieving technical maturity and accelerating deployment. This stage is almost reached for the aggregation of accounts (AIS), but the initiation of payment (PIS) is even further behind.

In France, Open Banking payments are little known or widespread among the general public.

The merchants met during our Open Banking & Payment Observatory often cite the cost for the payer as a barrier to offering this payment method. Indeed, some ASPSPs charge 50 cents to 1 euro to the customer who initiates an instant transfer (SCT Inst) via his online bank. On the other hand, these same merchants cannot accept the risk linked to the initiation of a traditional transfer (SCT) whose guarantee of execution and availability of funds is generally D+1.

Finally, the ergonomics with the different redirections or information to be re-entered (online banking identifier, etc.) is not as fluid at this stage as an xPay payment.

What are the barriers to payment via Open Banking in Europe? What elements are missing to drive the adoption of Open Banking payments in Europe?

The obstacles to Open Banking payments in Europe are of a different nature.

Firstly, in terms of implementation, there is a wide variety of approaches across the continent with several standards coexisting (STET, Berlin Group, Open Banking UK, Polish Open Banking, etc.). Moreover, for some of these standards, the definition leaves room for interpretation and leads to slightly different implementations from one ASPSP to another. This generates significant integration and maintenance efforts for the players, and therefore a significant effort to “simply” guarantee the accessibility of all ASPSPs.

To encourage the adoption of Open Banking payments at the European level, strong governance may be necessary to anticipate and resolve the difficulties of open standards. The organization set up in the UK at the start of its program and its continued development is undoubtedly inspiring. The API Scheme logic initiated at ERPB (SEPA API Access Scheme) and EPC (SEPA Payment Account Access) is another.

Another dimension concerns the underlying business model. PSD2 bonds have made this two-sided market possible by opening up all ASPSPs, but this has yet to create a business model for both sides of the market. The development of Open Finance APIs, monetizable by ASPSPs, can solve this problem and allow ASPSPs to find remuneration by incentivizing their higher GNP customers to allow this paid access to their payment data. The work initiated by the Berlin Group on this subject is going in the right direction.

But all of this will only be achieved if we consider the dimension of very concrete use cases anchored as closely as possible to merchants’ business processes. Open Banking payment cannot compete “upfront” with a well-established payment instrument such as the card. Participants in our Purchasing and Payment Path Observatory emphasize that innovation must resolve sensitive points to be legitimate and emerge (eg large baskets, trying again when a card payment has been refused).

What prospects do you see for the Open Banking payments industry in Europe in 2022 and beyond?

We imagine that Open Banking payments will develop around instant transfers. For example:

  • If PPE is created, the strength of the brand may limit the interest of payment via Open Banking in the long term;
  • If the European authorities make SCT Inst mandatory for transfers via online banking, this will create a call for 3-corner Open Banking solutions initiated by merchants;
  • In a market like France with (where the obligation to issue electronic invoices is progressive between July 1, 2024 and January 1, 2026), the combination of RTP (Request To Pay) and Open Banking payment initiation can create use cases for B2B.

About Thierry Leblond

Thierry is Head of Payment Consulting at PW Consultants. He assists clients involved across the entire payment value chain in their strategic decisions: investment (due diligence), watch (48-month trend), positioning (market assessment), governance (payment manager), product launch (business plan) or choice of solution (soft). He led the publication of two white papers: Open Banking & Payment (2020), Customer journey & Payment: to Unified Commerce (2022). Thierry joined PW Consultants after 8 years of experience in the payment subsidiary of Crédit Agricole and 14 years at Ernst & Young, during which he led several international payment systems projects.

About PW Consultants

PW Consultants is a Paris-based consulting firm specializing in the payments industry. With 55 consultants, we have been working for more than 20 years with all the players in the ecosystem (banks, merchants, schemes, manufacturers, etc.) in Europe and around the world to ensure that payment connects the worlds at the crossroads of societal issues. , technical and regulatory.

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