There are several ways to make bank transfer payments, and one option that continues to grow in popularity is Open Banking. Not only is Open Banking convenient and easy to use, it involved significantly lower transaction fees, making it the most cost-effective method. In this article, we delve deeper into why Open Banking is Cheaper.
Open Banking vs Card Payments
Traditional card transactions have to pass through a chain of several parties including a payment gateway, acquirer, and processor, before the funds are cleared. This process means that it can take several days before the transaction is settled and this delay can end up causing cash flow problems in some cases.
Open Banking uses A2A (account-to-account) payments which completely bypass this chain of intermediaries. Whilst A2A payments have been around for a while, the combination of new payment rails and a shift in consumer behaviour due to the COVID-19 pandemic started a resurgence of this form of payment.
A2A Payment Rails
Payment rails are the networks that allow the movement of funds between accounts. Rather than having a single standardised payment rail that is used globally, countries are responsible for setting up their own. The past decade has seen significant growth in the number of banks investing in payment rails to improve competition within the industry, reduce fraud and increase real-time payment abilities for greater control and to negate payment delays.
The importance of Open Banking for A2A Payments and reducing costs
Previously, A2A payments were not able to compete against other payment methods such as cards. This was mainly due to the fact people had to log into their bank accounts every time a payment was made and in some cases involved long authorisation processes. This lack of ease made using cards the simplest and most convenient option, however, this is no longer the case. Open Banking has helped transform A2A payments to become the perfect way to streamline the payment process.
Open banking uses APIs (application programming interfaces) to connect banks with third-party providers, enabling the fast movement of funds without the need for all the intermediaries involved with card payments. With the payer’s expressed permission money can simply be moved from one account to another with unparalleled speed and ease, without the unnecessary costs involved in the traditional card methods.
Less Admin Time results in lower costs
What makes Open Banking a cheaper alternative is not just the lower transaction fees. The fact that Open Banking payments are easier and more convenient means significantly less administrative time, lowering business costs even further.
Real-time payment processing
You can view real-time payment statuses, allowing you to track the status of a payment as it is made. This gives you greater visibility and control over your payment processes.
No payment chasing
With traditional payment methods, businesses often have to spend time and resources chasing payments from customers. But with Open Banking payments are made directly from the customer’s bank account, reducing the need for payment chasing and follow-up. A great time and money saver!
Businesses currently may not be aware of how much card payment services are costing them. These costs may seem inevitable and part of running a business however, card payment fees can end up taking a significant chunk of revenue which can be avoided by opting for lower-cost methods such as Open Banking. Transaction fees do not need to be extortionate and businesses need to embrace the cost-saving possibilities involved with Open Banking. The lower fees along with the savings made through fewer administrative tasks and time wasted on chasing payments, make Open Banking significantly cheaper.
TrustistTransfer utilises Open Banking bank transfers for payments, meaning transaction fees are lower. In fact, fees range from 0.29% – 0.39% compared to the typical 1.5%-3.5% charged by other providers. Not only are the transaction fees lower, the payments are time-saving and more secure, saving businesses more money in the long run as they do not have to spend as long processing payments or chasing up when payments fail.