New research has revealed that 74% of merchants intend to adopt Open Banking to offer instant bank payments, as the processing fees, chargebacks and fraud risk associated with card payments were identified as the biggest pain points.
The research by Open Banking platform TrueLayer and YouGov, ‘Change at the checkout – ecommerce payments after the pandemic’, found that credit and debit cards still dominate as the preferred online payment method for shoppers at 50%, rising to 63% for purchases over £200.
However, 38% of the 891 consumers surveyed are using digital wallets – such as Google Pay, PayPal and Apple Pay – as their primary payment method.
Among the 350 merchants that responded, 49% rated the high cost of payments in their top two pain points with existing payment providers and for 31% it was their biggest pain point.
High fraud and chargebacks were identified by 36% of merchants as their top two pain points, according to the findings.
Ossama Soliman, chief product officer at TrueLayer, said: “Debit and credit cards are falling short because they weren’t designed for digital commerce at scale. Traditional bank transfers are also flawed, taking shoppers away from the checkout and forcing them to manually copy over transaction details.”
The study discovered that as part of their long-term strategy, 74% of merchants plan to offer instant bank payments via Open Banking and that 63% of shoppers said they would be comfortable paying by Open Banking, particularly for big ticket items, such as flights and vehicle rental.
Those aged between 24 and 34 were found to be the most comfortable paying by instant bank transfer (77%), dipping to 74% among 35 to 44-year-olds.
Soliman added: “The opportunity – and need – to create the ultimate online payment experience is huge. But it clashes with the reality of incumbent payment methods, with merchants facing the challenge of mounting costs from transaction fees and chargebacks.
“That is why so many are examining instant bank transfers via Open Banking to deliver digitally-native payments with conversion rates up to 40% higher than cards at a cost that is much lower than cards.”
According to the research, security is the biggest concern for shoppers, with 60% having abandoned an online basket because they were worried about a lack of payment security.