The Open Banking Challenge Series: Why Merchants Hesitate to Embrace Open Banking Payments

Explore the reasons behind merchants' reluctance to adopt Open Banking Payments. Dive into the complexities of uncertain payment guarantees, refund processes, performance gaps, and cost considerations.

Why Merchants Hesitate to Embrace Open Banking Payments

In the rapidly evolving landscape of digital payments, Open Banking Payments have emerged as a promising contender. With 6 million users, it’s a system that seems poised for success, right?

The short answer is yes. But as of yet, it’s not as simple as it sounds. 

The giants of various industries, known for their significant transaction volumes, are slow to adopt Open Banking Payments. Unlike specialised payment businesses, these titans are primarily concerned with selling commodities and rely heavily on seamless payment processes. Implementing a new payment method involves substantial risks, changes, and investments across both physical and online platforms. 

The hesitance of such large merchants to make this shift could be attributed to several factors.

In this article, we will delve into these factors and explore potential solutions. As part of an ongoing series called “The Open Banking Challenge”, we will explore each of the following points in 4 separate articles:

  1. Uncertain Payment Guarantees: Even though a bank approves and sends money on behalf of a customer, there is no 100% assurance of payment arrival. This lack of certainty undermines merchants’ confidence in Open Banking Payments as a reliable exchange of value for their commodities.
  2. Complex Refund Process: Performing large-scale refunds through Open Banking Payments lacks an easy and standardised procedure, unlike established card schemes. Banks often do not provide account details required for refunds, and obtaining consent from both merchants and customers poses challenges, particularly in comparison to the streamlined card scheme space.
  3. Performance Gap: The processing performance of Open Banking Payments is still far behind established card schemes. This performance gap raises concerns about the reliability and efficiency of Open Banking Payments for high-volume transactions.
  4. Cost Considerations: The transaction costs associated with Open Banking Payments may not be attractive enough to entice large merchants to switch from existing payment methods, especially when compared to the cost-effectiveness of traditional card transactions

As you can see, the hesitance of large merchants to fully embrace Open Banking Payments is rooted in a combination of factors. Addressing these challenges through coordinated efforts between industry stakeholders can pave the way for wider adoption and fulfil the original mission of Open Banking – to enable competition and innovation in the payment landscape. 

As we explore each of these points in more detail in the upcoming articles, the conversation around Open Banking Payments is set to gain deeper insights and potential solutions.

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