What are Open Banking Payments?

Open Banking is a system that enables the secure sharing of financial data between banks and authorized third-party providers through Application Programming Interfaces (APIs). The purpose is to relate to competition, innovation, and consumer control in the realm of financial data.

Open Banking Payments relate to this system, enabling consumers and businesses to make payments from their bank accounts via third-party applications.

Open Banking Payments function by using secure APIs to create a direct link between a merchant and a customer’s bank. This standardized route allows vetted third-party organizations, known as Payment Initiation Service Providers (PISPs), to initiate payments on behalf of the customer.

The process presents a series of steps along with security provisions.

1. A consumer chooses the Open Banking payment option at checkout.
2. The PISP securely redirects the consumer to their own bank’s app or website.
3. The consumer authorizes the payment using their bank’s standard, robust authentication (e.g., face ID, fingerprint, or password).
4. Upon payment, funds are transferred from the customer’s account to the merchant’s account.

This system bypasses traditional payment gateways, and no card details are ever entered or stored by the merchant.

The implementation of APIs in Open Banking Payments provides a different approach unlike the old-school methods, potentially impacting their relevance.

• Segurança: Eliminating manual card entry and storage could have an impact on the likelihood of violações de dados. Transactions are subject to security measures comparable to those employed by banks.
• Redução de Custos: Merchants may experience different transaction fees compared to pagamentos com cartão, and alterations in operational costs might result from adjusted financial processes.
• Payment Speed Impact: Increased payment settlement speeds, possibly instant, can have an effect on business cash flow and influence the availability of immediate services such as instant refunds or account funding.
• Checkout adjustments: Modifications to the checkout process may correlate with business performance. 

Changes in how consumers interact with their financial data support services like fraud detection and tailored financial products.

Open Banking is not expected to completely replace card payments but rather to exist as a complementary option in the payment ecosystem.

Open Banking relates to a number of applications and different payment models in several industries.

• E-commerce: Instant payment refunds and simplified checkout processes.
• Financial Services: The speed of loan approvals and funding for brokerage accounts may be improved.
• Personal Finance applications: These utilize real-time data for functions such as budgeting and financial management.
• Debt collection: Facilitating payment reconciliation.
• New Models: Interoperability between platforms may influence services like personalized lending and customized treasury services, potentially affecting financial inclusion.

The evolution of Open Banking implies continued teamwork between banks and fintech companies. This evolution also presents cybersecurity and data privacy considerations necessitating security measures.

Regulatory frameworks are critical for maintaining protection and standardization.

Os principais regulamentos incluem:

• PSD2 (Payment Services Directive 2) in Europe.
• The Consumer Data Right (CDR) in Australia.
• The proposed PSD3 in the EU is expected to have a continued influence on the payments landscape.