How to persuade your customers to use open banking payments

It’s one of the most common questions we’re asked by merchants: “How can our customers be encouraged to choose ‘Pay by bank’ at the checkout?”

It is, of course, a very valid one. Card payments are embedded into shoppers’ everyday lives. They’re instinctive. They feel relatively convenient. If you’ve never used an alternative payment method, then occasionally searching for your CCV code or entering new card details feel like small prices to pay.

Delivering a meaningful incentive

We talk a lot about the benefits of open banking payments by contrast – how they’re faster, safer and easier, how they offer real-time refunds and how, generally speaking, they give shoppers more freedom and control. We know, however, that information alone won’t be enough to spark a wholesale shift away from cards.

What’s needed, then, is a meaningful incentive – one that’s delivered at the perfect moment, and which is too powerful to ignore. To arrive at one, it’s worth exploring a hypothetical example…

Say you’re booking a city break on a well-known travel website. You’ve found your hotel and flights, and you’re ready to pay for them using your debit or bank-issued credit card. You start entering the first few digits of your card number and, hey presto, a pop-up appears. It says that, if you switch to an open banking payment, you’ll earn x number of reward points that you can put towards your next trip. What would you do – stick or switch?

Transforming card payments into bank-direct payments

We played through this scenario and came up with Transformer – a tool that recognises who a shopper banks with when they start typing the first six to eight digits of their card number. Said pop-up then appears, alongside an incentive of the merchant’s choosing and a prominent call to action. When this is selected, the customer is seamlessly taken to their bank’s app or online banking to complete their payment.

They end up benefitting from a superior online payments experience (and receiving their reward, of course), while the merchant successfully bypasses high card interchange fees and avoids the risk of chargebacks.

What happens when a shopper tries a superior online payments experience? They come back for more. Speed, ease, safety and control count for a lot (as do rewards). By analysing our checkout data, we’ve discovered that 80% of customers who use Volt for the first time make a repeat purchase within one month.

Cross-vertical use cases

The beauty of Transformer is its relevance across e-commerce verticals. Car rental or subscription firms could offer bonus miles, for example. Online gaming companies could offer modest bonuses. Fashion retailers could offer loyalty points. Events companies could even offer priority access to customers who pay by bank. In short: there are many potential incentives that merchants across sectors are free to explore and experiment with.

Irrespective of Transformer, it’s clear that open banking payments are on the cusp of going mainstream. In November 2023, the UK alone saw a record number of 12.85 million open banking payments made – a year-on-year growth of 78.5%. In 2024, it’s expected that almost 200 billion transactions will be made on the world’s instant payments rails – a 185% increase from 2020.

Turbo-charging open banking adoption

What’s behind this impressive rate of adoption? Well, aside from the benefits we’ve already explored, it’s things like Strong Customer Authentication’s (SCA) rollout, which creates an additional layer of friction for card payments. With open banking payments, SCA is indistinguishable. One other thing worth highlighting: customers trust their banks, especially compared to other financial institutions. If they can ‘pay by bank’ in a way that’s faster, easier and safer, then that’s what they’ll do.

Transformer, we believe, can help drive this shift. When merchants ask us the question at the top of this article, it means we can not only give them a helpful answer, but arm them with a tool that speeds up their cashflow, saves them money, and delights their customers. As its name suggests, it’ll be transformative.