The best decisionWhy Open Banking?
Offering open banking as a payment method is not a novelty anymore. Not doing so can cost your business valuable clients. If you’re still unsure, read about the benefits of open banking below.

It’s New and Fast-Growing

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A New Era of Payments

Before open banking, traditional banks held a monopoly over customer data. Yet European PSD2 regulation emerged to change this. Enforced in 2018, it mandated banks to share data with licensed third-party providers. This happens strictly with customer consent. The data sharing fostered innovation in payments, making them quicker, smoother and more secure.

Fast-Growing Service

Juniper Research forecasts the total value of OB transactions to reach $330bn by 2027. That’s up from $57bn in 2023, a total growth of 479%.

More Innovative

Consumers value innovation and superior payment flows. With its speed and simplicity, open banking is becoming the preferred choice for many.

It’s Highly Profitable

Lower Fe­es

Open banking offers lower transaction fees than traditional card payments. Payments occur directly (from account to account)

Reduced Costs and Fees

Open banking APIs remove payment commissions and most of the operational costs.

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No Chargeback

Again, since no card networks are involved, open banking payments cut out chargebacks. Merchants can say goodbye to those hefty processing fees.

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Cost for Merchants

All merchants receive uniform pricing. The only change possible is a decrease in response to competitive pressures.

Fast and Effective

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Faster Payments

Settlement times are quicker with money showing up at the merchant’s account almost instantly. This can help you to manage your cash flow and accounting better. Consumers can pay quickly, without long processing times. As the settlement times are shorter, they can budget more efficiently.

Efficiency

Open banking solutions can consolidate data into a single platform. From customer insights to verification solutions, it offers diverse business tools.

Better User Experience

Consumers pay from their secure banking interface without having to manually enter card details. This saves them effort and time, resulting in an improved customer journey.

Higher Conversion Rates

Open banking makes the payment user experience (UX) simpler by eliminating frictions such as manually entering card details from the process, resulting in higher conversions.

Personalisation

Open banking data can be used to analyse customers' financial habits and behaviour. Based on these insights, merchants can offer more tailored experiences.

Acceptance rate of open banking transactions of returning users

Financial InstitutionAcceptance Rate, %
why-open-banking.benefits.section-3.cards.card-4.inserted-content.table.tbody-1.header.col-1Germany
Up to 89%
Sparkasse
88%
Volksbank Raiffeisenbank
89%
Postbank
88%
Deutsche Bank
85%
Sparda-Bank West
88%
why-open-banking.benefits.section-3.cards.card-4.inserted-content.table.tbody-2.header.col-1Great Britain
Up to 92%
Monzo
92%
Revolut
91%
Barclays
89%
Santander Bank
91%
why-open-banking.benefits.section-3.cards.card-4.inserted-content.table.tbody-3.header.col-1Netherlands
Up to 92%
ABN Amro
92%
Rabobank
90%
ING Bank
91%

*Based on the transaction data of returning users taken from Noda’s platform in January 2024

It’s 100% Secure

Control of Financial Data

Data sharing can only happen with explicit customer consent. If consumers decide to stop sharing their data, they can opt out from open banking anytime.

Onboarding & KYC

Open banking data solutions offer instant verification of identity, sources of wealth, and other elements, which can help you in onboarding new clients quickly.

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Better Security

Open banking is based on secure APIs. Authorisation of payments happens with the customer’s trusted bank. Plus, open banking is fully regulated under European PSD2 with Strong Customer Authentication (SCA) being a legal requirement.

Boost your business with Noda

Unleash the Power of Open Banking

Noda’s robust online payment ecosystem connects all leading banks across the UK and EU, facilitating effortless transactions

28

сountries covered

2000

сonnected banks with 30,000+ branches

10

integrated networks

Common Myths about Open Banking

Like any new technology, open banking is often misunderstood. These misconceptions can lead to merchants avoiding open banking payments due to lack of knowledge. Here, we bust common myths.

Myth 1. Open Banking Means Everything is ‘Open’

There is a common misunderstanding of the word ‘open’ in the concept of open banking. Open banking doesn’t mean that banks openly share customer data with whoever wants to access it. In fact, third-party providers must undergo through rigorous regulatory licensing with national regulators if they want to implement open banking. For example, in European PSD2, providers must obtain either AISP or PISP licence to access customer information.

Myth 2. Open Banking Isn’t Secure

Open banking is enabled by secure APIs shared by banks with licensed third-party providers. When a customer chooses an open banking payment they are automatically transferred to their trusted banking interface, where the payment is authorised. This API app-to-app redirection prevents cybercriminals from potentially stealing their data, especially when compared with practices such as screen scrapping. Plus, under PSD2, Strong Customer Authentication (SCA) is a legal requirement for open banking payments. SCA is a multi-factor authentication measure aimed at preventing impersonation fraud. 

Myth 3. Misunderstanding Data Sharing

Some customers may wrongly assume that when they consent to data sharing, the whole world will be able to see what’s happening in their finances. This is simply not true. Only authorised third-party providers can access customer data. To get such a license, providers must obtain it via a national regulator such as FCA in the UK, BaFin in Germany, ACPR in France, and other relevant authorities of the country in question to make sure that providers comply with the rules and handle data correctly. Plus, customers can withdraw their consent anytime. 

Myth 4. Open Banking Doesn’t Support Smaller Banks

There is a misconception that open banking payments only work for accounts at major banks. In reality, the open banking ecosystem is large and includes many smaller financial institutions too. According to Open Banking Tracker, there are 4,394 connected banks across 73 countries. At Noda, we connect to 2000+ banks across the UK and EU.

Myth 5. Clients Paying by Card Will Be Put off by Open Banking

Some merchants may assume that the ‘pay-by-bank’ option may put off consumers who prefer paying by card. In fact, OB payments are much simpler and more secure, as customers do not need to enter their card details manually. The money is transferred from the same bank account that’s linked to a card, yet the transfer bypasses the card network, leading to faster processing and lower commissions. That’s why customers increasingly embrace open banking over cards. In the UK, for example, 11% of consumers are active users of this payment method. 

Myth 6. Card Payment Conversions are Higher than Open Banking

Conversions are the key metrics for payments. Therefore, it’s important to get them right. There is a myth that card payments lead to more successful transactions than open banking payments. In truth, the UX for open banking is much simpler. The users are redirected to their bank’s interface, and money is transferred directly from their bank account. This prevents the risk of mistyped card details and saves customers time and effort, leading to higher conversions.

Myth 7. Open Banking Payments Require More Payment Details

Again, this is a misconception. As mentioned above, open banking payments don’t require manual information entry. Customers are redirected to their banking interface, where payments are authorised. The authentication may involve a passcode entry, a biometric verification, like a fingerprint scan or a face ID, and a code sent to their device. This journey is much easier and less time-consuming than entering lengthy card details.

Myth 8. Integration with Client’s Bank Will Fail

Some merchants may think that even if a client finds their bank in the list, the integration will be full of friction, and the transaction will ultimately fail. We can assure you that open banking API integration is seamless as these APIs are standardised across PSD2 countries and banks. See how it works for yourself with Noda’s demo of an open banking transaction.

Myth 9. Open Banking Payments Take Longer

Some merchants may think that open banking payment processing is slower. In reality, payments made through cards involve intermediaries that incur longer processing time. Open banking payments happen from account to account, so no card networks are involved. Hence the payments are much quicker.

Myth 10. Customers Aren’t Used to Open Banking Payment Flow

As mentioned earlier, customers increasingly prefer open banking over other payment methods. Statista estimated that by end-2024, the number of open banking users worldwide will reach 132 million. The rapid adoption of open banking is a clear sign of consumer trust. OB payments offer better, more intuitive UX, and consumers value the superior payment flow.

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NAUDAPAY LIMITED, (Company Number: 11741664) with the registered address: 162 Buckingham Palace Road, London, SW1W 9TR, UK is an authorized Payment Institution and regulated by the Financial Conduct Authority (FCA) (Reference number: 832969) under the Payment Services Directive ((EU) 2015/2366)

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