Mastercard Payment Gateway Services & Open Banking: A force for good

Open banking and the payment landscape

The world of payment choice is upon us - 76% of customers and 79% of small businesses say they like to have as much payment choice as possible.? New payment methods have been adopted by businesses and consumers, each offering clear benefits. During a time of money-flow difficulties and the accelerating decline of cash, account-to-account (A2A) payments can be invaluable for small businesses and those relying on impulse payments, like charities.

Open banking allows open access to financial data in a secure way, giving accountholders more control over their financials. With an accountholder’s consent licensed business can access accountholder’s financial data or instruct payments on their behalf creating the opportunity to build better financial services experiences.?

Traditional banks have been encouraged by regulators and the industry to participate in this global phenomenon.? The pandemic has also increased public demand for open banking services – 49% are willing to try it, and 62% are ready to securely share personal data with third parties to access services.

It may still be a new term to the average shopper, but as a concept, open banking payments is one way to make common A2A payments easier, as well as to enable a host of other solutions.?

As open banking payments mature, there’s a natural opportunity for expansion into more retail-adjacent sectors with higher volumes and lower ticket value.

How MPGS is embracing open banking payments

Earlier this year, Mastercard announced a partnership with Lloyds Banking Group in the U.K., resulting in a new solution, PayFrom Bank, an A2A payment solution that lets consumers pay using their mobile banking application at the merchant’s checkout page. It’s secure, with no need to enter any account details, and authentication is done directly with the consumer’s bank, leveraging the consumer’s biometrics. PayFrom Bank uses MPGS as a white-label payment initiation application in conjunction with Mastercard Open Banking Connect.??

For consumers, the user journey is intuitive. It’s a digital-first payment solution using the familiar interface of their mobile banking application. They can even see the balance of their account before confirming the payment. The result is a frictionless payment solution that offers a great user experience for consumers as well as safety and control.?

For merchants, especially small businesses, it provides another payment choice that reaches over 95% of all U.K. bank account holders. Checkout is also smooth, with fast settlement that improves cash flow, helping these businesses bounce back from lockdowns and empty streets.

For banks, it is an opportunity to refresh their strategy and value proposition, plus reengage with consumers and businesses. This means banking applications playing a bigger role in our daily lives, increased collaboration between banks, and more opportunities for fintech companies and BigTechs to address consumer and business pain points.

For third-sector organizations like charities, benefits like smooth transactions and increased confidence are crucial. A revenue stream dependent on impulse donations, repeat giving, and goodwill means a great customer experience is key – and every little bit helps!

A force for good – open banking payments and nonprofits

According to a Charities Aid Foundation UK report, the pandemic decreased opportunities to fundraise through face-to-face interactions leading to a drop off in cash donations - the most popular way of giving. The report also indicates donors are likely to continue to avoid using cash wherever is possible and use contactless, debit or credit cards instead. At the same time there has been a sustained increase in cashless giving via website or app (from 13% to 24%). Hence, it seems the pandemic is accelerating digitalization of donations for some charities.

Open banking payments could be a choice for charities that want to capture new flows via website or app. The easy-to-use interface removes friction in the payment process, making it easy to onboard new donors and retain existing ones. But it doesn’t stop there, since it can leverage faster payment rails like in the U.K. and the European Union, charities can have access to funds within minutes, improving their cash management. ?

Making an impact, securely

This isn’t theoretical either. I was delighted the first customer to use this solution was a charity. I felt more than ever a real sense of making a difference with the work we do, helping businesses and people through innovative and inclusive technology like open banking.

When our partner’s solution went live, my team started donating, both to contribute to the charity and experience firsthand how the future of payments might look. And it didn’t stop there. We spread the word at Mastercard, inviting our colleagues outside the project to also donate.

Thanks to the innovative attitude and hard work from teammates and our partners and customers, donating is now as easy as it is worthwhile.?

Crucially, security will always be paramount. When creating our own open banking solutions strategy, fraud risk and security was a priority for us. We know that while consumers have more trust in digital solutions, they want to know illicit third parties aren’t going to get hold of their data.

Open banking payments manage to deliver an alternative way to pay, that is intuitive while remaining compliant with the Strong Customer Authentication (SCA) requirements from the PSD2 regulation. Open banking is certainly disrupting the industry by levelling the playing field, enabling banks to give the customer the choice of how and with whom they want to share their data. It also removes barriers for new players to enter the market, facilitating the creation of frictionless, faster, and more secure products and services.