Pay by Bank: How Open Banking Will Save You Money
The global open banking market is believed to reach $48.13 billion by 2026. That’s a 26.5% growth increase since 2021. But what is open banking? Why is it taking off? And is it even legal in Australia?
Well, not only is open banking legal in Australia, it’s the next big thing. It’s cutting merchant fees by up to 80%, helping businesses save money while providing a more seamless payment journey for their customers. Statistics from the UK—who’ve been dabbling in open banking longer than we have in Australia—are a testament to how impressed both consumers and merchants are with this technology. As of June 2022, the number of people using open banking in the UK passed 6 million!
But first, what’s the meaning of open banking?
Often referred to as open bank data, open finance or in Australia, Consumer Data Right (CDR), open banking gives consumers the choice to share their data with external platforms. Why? So that they can leverage the power of financial apps, services, and banking products. It’s important to note that the third parties they share their data with have all been accredited by the ACCC (Australian Competition & Consumer Commission).
Open banking also enables customers to make payments using their bank account rather than using a credit or debit card; which is where ‘Pay by Bank’ comes in.
Note: CDR will never ask for your internet banking passwords. Instead, it uses API’s (which, put simply, is the way systems communicate) to transfer data meaning it is far more secure and regulated than traditional data-sharing methods.
What is Pay by Bank?
Also known as a bank transfer or ‘direct debit’, pay by bank is a method of online payment that lets customers pay for goods and services using their bank account. Pay by Bank is supported by a wide range of banks and financial institutions around the world, and is now becoming a popular payment method for online shoppers in Australia because of its low cost, simplicity, convenience, and security.
To use Pay by Bank, customers simply need to select it at checkout on a merchant's website. The simple set up process usually involves entering their bank account information and confirming the payment through their bank's website.
4 advantages of Pay by Bank
It reduces merchant fees by up to 80%
These days, credit cards and third-party payment options like PayPal, charge merchants exorbitant fees to take payments from their customers. Because of this, merchants often have to share or pass on these fees to their customers. Unlike these payment methods, the fee charged from Pay by bBank is significantly lower. That means you save money with every single transaction, and if you have a lot of those, it certainly adds up.
Pay by Bank also eliminates the need for merchants to invest in expensive card-reading equipment or other infrastructure to accept these payments, ultimately lowering the total cost of ownership. Lastly, The luxury of choice offered to your customers when ‘Pay by Bank’ is thrown into the mix means a wider range of payment options, which can help to increase sales and drive customer loyalty. This in turn can increase in revenue and offset the cost of any merchant fees.
It drastically minimises fraud
From June 2020 to June 2021, there were $490.1 million in fraudulent transactions on cards in Australia. Pay by Bank reduces the risk of fraudulent transactions as the payment is made directly from a customer's bank account, also helping to reduce the costs associated with chargebacks and other forms of fraud.
It cuts out the middleman
By connecting directly with banks and enabling the direct transfer of funds between yourself and your customers using secure open banking technology, there are no third-parties needed meaning unnecessary steps and costs are removed.
It’s more secure for your customers
Thanks to the ADR (Accredited Data Recipient), there are strict rules around what can be done with consumer data. There are no internet banking passwords when granting consent to open data. Instead, consumers will undergo a form of multi-factor authentication such as an OTP (one-time password), so there’s no need for your customers to worry about data breaches or unwanted marketing.
How can your business save money with Pay by Bank?
Waave is a new payment platform for businesses to transact with their customers with up to 80% reduced merchant fees and a single flat fee of just 28 cents. Using data and open banking technology, as well as operating with every Australian bank there is, Waave helps merchants enable convenient and secure consumer-to-business payments minus the unwanted costs, fraud and chargebacks.
In short, it’s modernising direct debit by bringing into the 21st century.