Open Banking Payments: Transforming the Future of Transactions

Open banking payments enable consumers and businesses to make seamless, secure, and direct account-to-account transactions using open banking APIs. Unlike traditional card payments that rely on intermediaries, open banking payments connect payers directly to their banks, offering a faster, cheaper, and more transparent payment experience.  

In Europe, open banking payments are governed by regulations like the Payment Services Directive 2 (PSD2), promoting security, efficiency, and innovation. 

How Do Open Banking Payments Work?

1. Customer Authorization

   The customer initiates a payment via a third-party provider (TPP) such as a fintech app or e-commerce platform. Consent is granted through Strong Customer Authentication (SCA) for security. 

2. API Integration

   The TPP uses the bank’s open banking API to connect directly to the customer’s account and request the payment. 

3. Transaction Execution

   Once authorized, the payment is processed directly between bank accounts, eliminating intermediaries like card networks. 

4. Confirmation

   Both the payer and payee receive real-time confirmation, ensuring a seamless transaction experience. 

At Samlink, we help banking institutions implement secure and compliant open banking payment solutions, empowering them to stay ahead in the evolving digital payment landscape 

Key Benefits of Open Banking Payments

1. Cost Efficiency

• Lower Transaction Fees: By removing intermediaries like card networks, businesses save on payment processing fees. 
• Reduced Chargebacks: Account-to-account payments minimize the risk of fraud-related chargebacks. 

2. Faster Processing

• Instant Payments: Many open banking payments are processed in real time, improving cash flow for businesses and consumers. Instant payments are increasingly available through SEPA Instant Credit Transfer (SCT Inst) in Europe, depending on bank participation and infrastructure. 
• Immediate Confirmation: Instant feedback ensures transparency and trust. 

3. Enhanced Security

• Strong Customer Authentication (SCA): Multi-factor authentication enhances security and reduces fraud risk. 
• Direct Bank-to-Bank Connection: Sensitive card data is never shared, reducing vulnerability to breaches. 

While fraud risks are reduced through strong authentication, new threats such as social engineering attacks highlight the importance of ongoing user awareness and security monitoring. 

4. Better User Experience

• Seamless Checkout: Customers can pay directly from their bank accounts without entering card details. 
• Account Aggregation: Users can select any linked bank account for payments, enhancing convenience. 
• Reading recommendation: Modernising payment services and opening financial services data: new opportunities for consumers and businesses

Use Cases for Open Banking Payments 

• E-commerce: Faster, cheaper alternatives to card payments at online checkouts. 
• Bill Payments: Simplified recurring or one-off payments for utilities and subscriptions. 
• Peer-to-Peer Transfers: Instant and secure payments between individuals. 
• Financial Services: Loan repayments, investment deposits, and savings contributions. 

Compliance and Security 

Open banking payments adhere to strict regulatory standards: 

• PSD2: Mandates secure data sharing and strong customer authentication. 
• GDPR: Ensures customer data privacy and protection. 
• OAuth 2.0 & OpenID Connect: Secure protocols for authorization and authentication. 

In addition to PSD2, emerging frameworks such as PSD3 and the SEPA Payment Account Access (SPAA) scheme are expected to further shape the future of open banking payments by improving API functionality, enabling premium services, and establishing clear business models for TPPs and banks. 

At Samlink, we ensure that our solutions comply with these regulations, offering security, efficiency, and reliability. 

Samlink – The Future of Payments

Open banking payments are revolutionizing the way we transact, offering a more secure, cost-effective, and seamless alternative to traditional payment methods. By adopting open banking payment solutions, banks and businesses can enhance customer satisfaction, reduce costs, and drive innovation. 

Contact Samlink today to learn how we can support your payment transformation journey.