Perfect Partners: Payment Orchestration and Open Banking


Just as open banking opens up financial services, payment orchestration opens up payment systems to embrace change and opportunity, allowing merchants to easily integrate open banking into their payment ecosystem.

Open banking is no longer a new idea and acceptance of the concept is growing across all industries. Meanwhile, payment orchestration — a single integration layer that creates unified control across multiple payment channels — makes it easier than ever for merchants to adopt new payment services. Here’s why combining the two could be the catalyst for a frictionless checkout experience.

From getting groceries delivered within the hour to booking a taxi with the tap of a smartphone, consumers are now used to faster, more tech-enabled services across the board. of their lives – and payment for these services is no exception. This demand has forever changed the relationship consumers have with their banks, creating a new environment of open banking.

See also: Open Banking: has technology overtaken regulation?

The rise of open banking

Open banking was born in 2013 as part of the European Commission’s revised PSD2 proposal. This recommended that banks allow third parties to access account data and initiate payments. It has already become popular in other parts of the world; South Korea, for example, has over 20 million users. Here in the UK, the number of users has grown from one million in January 2020 to three million in 2021. Today, there are over five million active users in the UK.

It’s easy to see why. It offers consumers the speed and convenience of instant payments, while for merchants transactions are intelligently routed and monitored in real time. This means they can analyze performance and use data to reduce costs, increase acceptance rates, and simplify operations through automated reconciliation.

Plus, it uses a customer’s existing online banking application to initiate and authenticate transfers, so it doesn’t need to enter its account information online. This prevents sensitive financial details from being held by the merchant, resulting in a more secure process for both parties.

Nevertheless, security is still considered one of the main challenges facing open banking. The lack of standardized technical standards combined with complex internal technical systems could make the process prone to corruption and fraudulent activities. It is also potentially more difficult to prove who was at fault in the event of theft due to the complex chains of data access created by open banking.

Perfect partners

But the benefits outweigh the risks, especially if open banking is used in conjunction with payment orchestration, which can help mitigate the risk of fraud.

When faced with the risk of fraud, merchants may be tempted to apply general fraud prevention tactics to every transaction. But a systematic approach enabled by the orchestration of payments is more effective. It helps identify transactions that match specific risk profiles and choose the most appropriate fraud prevention tool.

This, of course, benefits the business, but selectively, rather than universally, by adding friction points for fraud prevention purposes, the customer also benefits from a better payment experience.

Payment orchestration and open banking make perfect partners. Just as open banking opens up financial services, payment orchestration opens up payment systems to embrace change and opportunity, allowing merchants to easily integrate open banking into their payment ecosystem.

The open access to customer data that merchants then gain provides valuable insights into consumer behavior, which in turn enables them to create tailored offers and initiatives. And because open banking as a payment method can be completed in just three clicks, it means a frictionless experience for shoppers that can reduce cart abandonment.

Transforming the payments landscape

Merchants are acutely aware that around a third of consumers will abandon a transaction if their preferred payment method is unavailable and feel pressure to meet the payment preferences of their local market.

This, coupled with the addition of payment orchestration, may well be the catalyst for more widespread adoption of open banking. Open banking has the potential to transform the rules of finance and financial transactions. It takes power away from banks and gives merchants and consumers greater choice. A PwC report predicts that £7.2 billion in revenue opportunities will be created by open banking this year, with 71% of SMEs and 64% of adults planning to adopt it for electronic payment transactions in 2022 .

Payment orchestration can help accelerate the mass adoption of open banking payments by allowing merchants to easily integrate them into their payment system. This will ultimately lead to lower payment transaction fees while reducing the need for card payments, direct debits and standing orders.

Because of the opportunity it presents and the payments orchestration that is now facilitating its adoption, now is the time for businesses to fully seize the opportunities that open banking has to offer.


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