If you’re a payment service provider (PSP) researching open banking, there’s a good chance that you’re:

• Tired of paying high transaction fees that eat into your profits with every card payment.
• Frustrated with slow settlement times that delay access to funds. Card networks often take days to settle payments, impacting your cash flow and leaving you waiting for funds.
• Looking for a better way to manage chargebacks and fraud. With card networks, disputes can be costly and time-consuming, and fraud prevention measures often lack the flexibility to adapt to emerging threats.

Open banking offers a solution to these challenges. By enabling direct account-to-account payments, it eliminates the middleman, providing faster, cheaper, and more secure transactions.

While open banking is still in its infancy, it’s growing fast. So, could it be time for your business to consider adding open banking to your payment options?

Read on to find out how open banking compares with traditional card networks, and explore how Yapily can help you transition to the next generation of payments.

In this article:

• How open banking processes differ from card networks
• Open banking vs card networks: a comparison
• 5 benefits open banking has over card networks
• Why should you use Yapily for your open banking payments?
• How Yapily helped Yotta Pay save businesses 90% on fees

If you’ve already decided on adding open banking payments as an option, book a call with our payment experts to see how we can help.

How open banking processes differ from card networks

Before comparing card networks vs open banking, it’s worth explaining how the card payment process differs from open banking payments.

The card process

1. The merchant’s gateway scans the customer’s card to identify the payment network.
2. It then contacts the network to confirm the customer’s authorisation.
3. The network communicates with the customer’s bank to verify that they have sufficient funds, and if they do, the bank approves the transaction.
4. Their bank then notifies the network, which sends the authorisation to the merchant’s bank for final approval.
5. Once approved, the transaction is completed and confirmed on the gateway.
6. But the process doesn’t end there. The merchant’s bank has to initiate the settlement process by communicating its daily transactions to the network.
7. The network then requests payment from the customer’s bank which generally takes around 2 business days to process.

Businesses also have to pay a fee for each transaction to the customer’s bank, the card network, and their own bank.

So how does the open banking process solve this?

The open banking process

1. The customer selects ‘Pay by bank’ at the checkout.
2. Then, they select which bank they would like to use.
3. The customer is redirected to their banking app and proceeds to approve the payment.
4. The merchant is promptly notified that the payment has been made.
5. Bonus: when merchants combine open banking data with a solution like Virtual Accounts, they’ll get confirmation of funds and immediate access to their money.

As you can see, open banking is a simple process. Curious about how it could impact your business? Book a call with our experts.

Open banking vs card networks: a comparison

There’s no denying that accepting card payments offers a high degree of convenience both in-store and online. But there are disadvantages such as high fees, lower success rates, fraud risks, and (a major one for consumers) slow refunds.

As you can see from above, the card process is far longer and slower than open banking.

Here’s how open banking and card networks stack up on key features:

5 benefits open banking has over card networks

While card networks have long been the backbone of digital payments, open banking offers several key advantages that address the downsides of traditional card systems.

Here’s how open banking stands out:

1. Faster transaction speeds: Card payments involve multiple layers of verification which can delay the transaction and settlement process. In contrast, open banking payments are processed directly from the customer’s bank account, for real-time transaction processing and instant settlement. This results in faster cash flow for businesses.

2. Lower transaction costs: Card networks involve many intermediaries who all take a cut through fees like interchange and gateway charges. Open banking removes these middlemen and significantly reduces transaction fees, which is especially beneficial for businesses processing large volumes.

3. Increased security: Open banking uses Strong Customer Authentication (SCA) for every transaction, providing a level of security with methods like PINs, passwords, and biometric authentication that card networks struggle to match.

4. Improved convenience: Open banking payments require no manual entry of card details, reducing friction at checkout, making the payment process quicker, and helping to reduce cart abandonment.

5. Easy integration: Open banking payments can be easily integrated into existing payment systems, allowing merchants to accept Pay by Bank alongside traditional card payments without overhauling their current infrastructure.

Ready to take advantage of these benefits? Get in touch with our open banking experts.

Where card networks have the edge: global acceptance

While open banking offers many advantages, one area where card networks still have the upper hand is in global acceptance.

With decades of infrastructure and consumer familiarity, card networks like Visa and Mastercard are almost universally accepted.

That said, open banking is rapidly catching up. According to recent reports, the global open banking market is projected to grow at a compound annual growth rate (CAGR) of over 25% through 2030. It’s only a matter of time before open banking begins to rival card networks on a global scale, offering businesses a better way to handle payments.

Why should you use Yapily for your open banking payments?

When selecting an open banking provider, you need a partner with the technology, infrastructure, and experience to transform your payments. Yapily is trusted by leading brands and financial institutions across the UK and Europe to deliver secure, scalable open banking payment solutions.

Here’s what you get when you use Yapily:

Save across all of your operations with our broad open banking coverage

If you’re looking to save on card fees using open banking, choosing a partner with broad coverage is important.

If your open banking partner doesn’t cover where you do business, you’ll need to enlist the services of multiple open banking providers, which can be costly and complex to manage.

With Yapily, you don’t need to worry about not having the right coverage. We have nearly 2,000 bank connections across the UK and EU.

As well as having broad coverage, we also have a deep range of payment options:

• Single payments (through our payment initiation service)
• Bulk payments
• Sweeping variable recurring payments
• Commercial variable recurring payments (we’re one of the only providers of cVRP in the UK)

However, if you’ve never used open banking before, you might be hesitant about the security.

Yapily’s payment services operate using a secure API, backed by ISO certification and enterprise-grade security. This means that your sensitive customer data is protected by top-tier security infrastructure that meets stringent regulatory standards.

Not familiar with variable recurring payments (VRP)? Learn more: What you need to know about Variable Recurring Payments

Leverage our payment initiation service provider licence and reduce time to market

To initiate open banking payments, you need to be authorised as a Payment Initiation Service Provider (PISP) by the FCA, or its EU equivalent. However, navigating this process can be expensive, complex, and time-consuming, especially if payment expertise isn’t part of your team’s skill set.

With Yapily, you can bypass this hurdle by using our PISP authorisation, saving you the effort and cost of obtaining it yourself.

Take Juni, a financial platform, as an example. By leveraging Yapily’s PISP authorisation, Juni was able to speed up its market launch and integrate open banking payments without the need to secure its own authorisation. This helped Juni reduce payment processing costs by 20% and increase payment acceptance rates by 12%.

(Read the full case study: How Juni + Yapily are supporting ecommerce businesses through open banking)

You’ll also benefit from dedicated onboarding and expert consultation. Our team provides hands-on guidance to optimise your open banking integrations, helping you go to market faster while improving overall performance and user adoption.

Choose to white-label your payment experience for full customisation, or use hosted pages for speed

When implementing open banking, you’ll need to set up new payment flows for when a customer decides to use this new type of payment option. You can design and develop the payment journeys internally, but if you don’t have the time or resources this can be costly and delay your time to market.

With Yapily, you can use our hosted payment pages and white labelling options, allowing you to integrate open banking into your website quickly while keeping your brand front and centre. This not only creates a consistent experience for their end users but also builds trust and improves conversion rates, as customers stay within the familiar environment of their chosen brand throughout the payment journey.

As a payment infrastructure platform, our goal is to take care of the technical complexities of open banking payments so that you can focus on delivering value to your merchants and end-users.

If speed is your priority—perhaps you’re helping a merchant test in a new market or launch a new product—we provide hosted pages that allow you to get set up quickly. These ready-to-deploy solutions are ideal for PSPs needing to offer fast, reliable payment integration without the immediate investment in customisation.

Whether you prioritise customisation or speed, we have the right solution to help you support your merchants effectively.

How Yapily helped Yotta Pay save businesses 90% on fees with open banking payments

Yotta Pay, the UK’s first ethical payments provider, is leading the way in sustainable payments thanks to its partnership with Yapily. By leveraging Yapily’s open banking platform, Yotta Pay offers merchants a low-cost, eco-friendly alternative to traditional card payments, with fees as low as 0.19%. Merchants now save up to 90% on operational costs and receive funds instantly, improving their cash flow dramatically.

Through Yapily’s infrastructure, Yotta Pay has eliminated the need for plastic cards and paper receipts, reducing the environmental impact of 30 million kg of PVC used globally for debit and credit cards.

Their zero-carbon QR code POS system provides an ethical payment solution, allowing consumers to pay seamlessly without apps or card details.

“With a successful rollout in the UK, Yapily’s platform and integrations play a critical role for us and will continue to do so. Our plans for bringing innovative new products to existing markets, and new ones across Europe, are possible thanks to working with an open banking partner that has everything we need to scale,” said Alexey Shmatko, CEO & Founder of Yotta Pay.

Learn more about our work together: How Yapily + Yotta Pay are making payments ethical

Unlock the power of open banking payments with Yapily

Ready to unlock the benefits of open banking and future-proof your payment offerings? Get in touch with our experts to learn how Yapily can help you transform your payment infrastructure and stay ahead of the curve.

Book a call

Sources:

• https://www.grandviewresearch.com/industry-analysis/open-banking-systems-market