PAYMENTS

EXPERIENCE
PLAYBOOK
What really matters
to your customers

REPORT 2023
F OREWOR D

What customers want from

their payment experiences

Francesco Simoneschi
Co-Founder and CEO at TrueLayer

A fast, smooth and secure payment experience is the key to winning customers, fostering
loyalty and — ultimately — growing your business. Unfortunately, most brands don’t
measure up to consumer expectations.

That's the key message from extensive research conducted by TrueLayer and alan. agency.

It may seem surprising that after decades of innovation, online payments remain a
problem. What about authorising payments via FaceID and fingerprints? Online wallets?
Haven’t they solved the payment problem?

The issue is that consumer expectations have risen faster than the industry can innovate.
Online payments to some extent still frustrate 87% of consumers.

However, our research with merchants found that standard techniques for improving
payment flows are still far from universal, even though they boost conversion rates. Our
survey of more than 4,000 consumers showed these methods are now seen as must-
haves in the eyes of the payer. In a focus group, one ecommerce shopper was blunt:
“There is still room for improvement.”

This report outlines:

■ What optimal end-to-end payment experiences look like

■ How to balance security against convenience, including surprising data on customer
views on enhanced security
■ How payments via open banking can solve many of these problems — and cut fees
at the same time. Our data also shows that consumers now understand and feel
comfortable with this payment method

True, designing a great payment experience is difficult. And the introduction of Strong
Customer Authentication (SCA) has made it harder still.

But these problems can be overcome by properly resourced, data-driven and customer-
focused payments, alongside the four key elements of security, trust, speed and convenience.

There is so much to lose for those who get their payment experience wrong, and so much
to gain for those who get it right.

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SUMM ARY

Seven things to know from this report

87% Almost
half
of consumers are frustrated of companies say integrating
with their payment experiences a new payment method takes
4 or more weeks

ARTICLE ONE Payment experiences ARTICLE TWO How to find the right
aren’t living up to consumer expectations payment tech partners

64%
of consumers say security
is the most important factor
in making a payment…

But authentication is also a major source of drop-off

for customers across all three verticals…

56%
of merchants surveyed
believe SCA is harming
conversion rates

ARTICLE THREE Balancing security and convenience in the payment experience

Clear, concise error Open banking creates

messages are important. an easier and safer
If a payment fails, user experience, which
customers want is important as people
to know why increasingly shop online
and as fraud becomes
more of a concern

ARTICLE FOUR Payment experience ARTICLE FIVE How to harness open banking
advice from industry experts in your payment experience

Payments experience playbook 3

About the research

To get insight into views of online payments, TrueLayer commissioned an

online survey of 4,304 consumers in 10 countries. Of these, 2,000 were
in the UK and the others sampled across Germany, Spain, France, Finland,
Sweden, Norway, the Netherlands, Australia and New Zealand. To provide
further understanding, 10 in-depth interviews were conducted one-to-one
with consumers.

To understand merchants’ views, TrueLayer commissioned an additional

survey of 150 companies offering online payments in the UK, Europe, and
Australia/New Zealand. All were engaged in ecommerce, iGaming, financial
services, or crypto investing. Online research was conducted by iResearch
in 2022.

Additional insights came from three online focus groups of experts

in ecommerce, financial services, and iGaming.

Percentages may not add to 100 due to rounding.

Payments experience playbook

Contents

1 Payment experiences aren’t living up

to consumer expectations

2 How to find the right payment

tech partners

3 Balancing security and convenience

in the payment experience

4 Payment experience advice from

industry experts

5 How to harness open banking

in your payment experience

Payments experience playbook 5

ARTICLE ONE

Payment experiences aren’t living up

to consumer expectations

Customers see room for improvement in online payments.

Brands that excel could win a competitive advantage
Despite many years of constant innovation, online payments still lag behind
customer expectations. We call it the “payments gap” — the gulf between
the experience customers expect and what they receive when they purchase,
invest, or move money online.

This gap remains wide for consumers surveyed — 87% expressed at least
some level frustration in making online payments. One ecommerce user said:
“My experience of online payments is positive, but on a scale of zero to 10,
I’m something like a seven. There is still room for improvement.”

Companies that improve their online payments experience can realise

a significant competitive opportunity. Asked if they abandon transactions
and try elsewhere if the payment is slow or frustrating, 55% of consumers
agreed or strongly agreed. Get payments right and your brand could be
serving those consumers.

Four key themes run throughout this report: security, trust, speed and
convenience. If you build a payment experience that fulfils these needs,
you can close the payments gap and seize your competitive advantage.

Security, trust, speed and convenience:

what consumers want

of consumers consider this their highest priority when

Security 64% making online payments

said familiarity and trust were most important when trying

Trust 31% a new payment method, higher than any other factor

would have less loyalty to a brand if they experience

Speed 56% a slow online payment process

said they would avoid payment methods that involve

Convenience 49% typing payment details

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Failing expectations: speed

As part of the online shopping experience, consumers are now accustomed
to the instant, single-click experience possible in dedicated apps using stored
payment details.

Entering payment details is a common pain point, with 59% of customers feeling
this to some extent. One ecommerce focus group participant from the UK said:
“Sometimes I have to type my card number every time, even when it's the same
company. It's annoying. I have to insert my details again and again.”

73%
say that slow or frustrating
payment will make them abandon
a transaction and try elsewhere

Simple steps like auto-populating payment details and offering one-click

payments can help reduce this frustration.

Joshua Fernandes, Head of Product at TrueLayer, notes that “thoughtfully and

intentionally caching all those details sounds basic, but many merchants fail to do
it, slowing down the experience.”

Among companies taking online payments, 19% do not offer auto-populated

forms. iGaming sites are leaders here: only 8% fail to provide this. Yet those using
auto-populated forms typically saw improved conversion rates — more than half
(55%) reported conversion rates increasing by more than 60%.

For one-click payments, the impact on conversion rates is similar, with approaching
half (44%) of merchants saying conversion rates were boosted by more than 60%.
Yet 18% of businesses don’t offer it. Financial services firms, in particular, are
passing up its advantages: 26% said they do not implement one-click payments.

This underlines a key point: many still don't understand the importance of speed
in a payments experience

Failing expectations: choice and confusion

Many businesses think they are helping customers by offering a long list of payment
options. This is particularly the case in iGaming and crypto investing. One iGaming
expert said: “We offer as many methods as possible because you need to cover
players that want to use cash, vouchers, e-wallets, cards, and online transfers.
We also want more than one option to give them fallbacks and allow testing.”

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I feel frustrated if I am required

to enter my card or bank details to
complete an online payment

20% Somewhat agree

39%
Agree/strongly agree 29% Disagree

11% Strongly disagree

of merchants do not offer do not offer

19% auto-populated forms 18% one-click payment

However, the data shows that a long list of payment options can leave consumers
confused. More than half of consumers (62%) said they would feel confused
or overwhelmed by more than five payment methods. In crypto investing,
it’s as high as 74% of users.

Many companies are becoming adept at deploying new payment methods,

as the data in chapter two shows. However, the cumulative effect can
be bewildering. Payment method selection is the third-highest drop-off
point during a transaction, beaten only by authentication and entering
payment details.

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How should companies decide on the number of payment methods they offer?
Lee Gabriel, Head of Payment Propositions at Metro Bank, says they should first
analyse what consumers expect. Card payments are still the most popular and
a must-have for almost every ecommerce business, for example. But consider
the types of customers you serve and seek the optimal options for this segment.
Less can be more.

Failing expectations: communication and trust

Trust is essential to any good payment flow. If someone feels misled, they won’t
stick around to complete their payment, let alone become a loyal customer.
That’s a big problem for merchants: for 55% of ecommerce businesses, returning
customers make up half their sales or more.

That’s why effective messaging and communication is so important. It can foster

trust even in a negative scenario. Take failed payments, a fact of life. Merchants
reported that even the most reliable payment methods fail around 30% of the
time. When this occurs, do you give customers a vague error message? Or
helpful feedback and a route to other forms of payment?

One user experience (UX) expert in iGaming said he worked on a game with 200
potential payment dead ends, from entering a wrong card number to problems
using face ID. But the game only offered three error response variants to players.

“We need to try as hard as possible to finish the transaction by explaining to the
user what exactly went wrong and improve communication between us,” he said.
“That includes improving inclusivity in communications with people with

How many payment options do

merchants say are ideal?
5 or less more than 5

Ecommerce 63% 37%

iGaming 43% 57%

Financial services 45% 55%

Crypto investing 82% 18%

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conditions such as dyslexia throughout the payment process and guiding and
meeting expectations at each point. They should always know exactly what to do
and never meet dead ends.”

Providing greater transparency doesn’t have to be painful, either. “One of the

most beautiful things you can do with your interface is make a payment failure
flow delightful. But most merchants don’t do this,” Fernandes says.

To me, instant means

pretty much within 30
seconds. I want instant
to be instant
Financial services user

“For example, if a card fails, explain why and suggest the next best method.
Rather than just saying ‘try again later’, which could cause frustration, say ‘your
bank is down, try again in an hour’. And if it could work soon, automatically try
again repeatedly so the user doesn't have to.”

More broadly, trust is built with good communication and transparency

on pricing. This can be a particular challenge if prices are changing fast —
consumers won’t react well if they return to a site to complete a transaction
and the cost has increased.

Bridging the gap

The key to creating a delightful payment experience is to establish a properly
resourced payments function that delivers on consumer expectations in the
four categories of security, trust, speed and convenience.

It is essential to be data-driven. “Sometimes it’s just difficult to initiate change

internally,” Fernandes notes, “for example, if they can’t get approvals, or teams
are too busy with other projects.”

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For ecommerce merchants, what percentage

of sales come from returning customers?

30%

26%

24% 24%

20%

16%

10%

5% 5%

21-30% 31-40% 41-50% 51-60% 61-70% 71-80%

Perhaps merchants haven’t gathered enough user feedback or data, he says.

“But with the right data you can do many things, such as predicting conversion
rates in a country, location or at specific times of day for different variants.”

Fernandes suggests using more automatic feedback prompts and finding

creative ways to gather contextual feedback. Conduct plenty of A/B testing,
for example, between different microcopy, prompts, colours and page positions.

But more resources help. “The most successful firms can do this because they
have development teams focusing only on the payments journey and end-user
payment experiences,” says Fernandes.

Payments experience playbook 11

ARTICLE TWO

How to find the right

payment tech partners

An effective partnership can be the key to creating a world-

class payment experience. How can you make the right choice
for your firm?

Payment technology integrations burn through development resources.

To optimise payment technology, it’s critical to decide on the kind of
technology supplier you need and how to work with them.

Ease of integration varies (see chart on page 13). In ecommerce and financial
services, around a quarter of companies (22%) said integration took less than
two weeks. Yet some companies are struggling: 16% of ecommerce firms said it
took three months or more. Getting the right partner can be critical to reducing
deployment time and ensuring a successful integration.

Choosing the right partner

Many different technology partners are available, and one size does not fit all.
But most companies need a provider that can adapt to their changing needs.
If you're trying to build a global payments experience, flexibility of approach
and technology will be critical.

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“It's good to have a partner that provides clear options that can be controlled
according to needs,” says Will Johnston, Director of Integration Sales at TrueLayer.
“For example, it’s good to have a choice about how quick you want the integration
to be, and whether you want more customisation.”

The right partner can help with strategic questions. Do you want to rely heavily
on the partner, using a default hosted page and software development kits (SDKs)?
Or will you take complete control of the payment experience by building your
own front end?

“Having an expert to guide you to the right choice is very important,”

Johnston says. “A complementary team can work together to create a
powerful user experience.”

Suppliers should also offer guidance on optimising conversion through the

payment flow. They should explain which screens are necessary and which are
beneficial to support payment conversion. Once mock-ups have been analysed,
the flow can be adjusted to fit any unique requirements.

How long does it take to add

a new payment method?

40%

37%

30%
30% 15%
of larger firms said
it takes three months
or more to add a new
22%
20% payment method

10%
9%

3%
Less than 2 weeks 4-6 weeks 3 months 6 months
2 weeks

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Gathering the best data

A good supplier should:

■ Offer recommendations based on solid, extensive data

■ Provide a wide range of detailed information, including design guides
and prototypes
■ Guide partners on how to make changes and edits
■ Advise on how users will experience specific payment methods

Some companies will require more guidance than others. A business processing
millions of payments through an established, commoditised product will likely
have substantial in-house experience. But smaller companies with less-
established brands tend to need more advice; they may be inclined to follow
the supplier's best practice recommendations.

A hands-on testing experience is also critical. Suppliers often need to see how a
flow performs when faced with a large payment volume. This process lets them
iterate on the flow, improving it over time.

“Imagine a flow that has already had millions of users. The supplier uses that
to hone their experience with A/B testing and other methods to maximise
conversion rates,” says Johnston. “Then compare that to a flow with only
thousands going through – they may not have such robust recommendations
and best practices.”

What do organisations think is the most-important

value-add of a new payment option?

Industry Top ranked Second priority

Ecommerce Risk/transaction monitoring Supporting customer KYC

iGaming Supporting customer KYC Risk/transaction monitoring

Reporting and analytics

Financial services Supporting customer KYC
Risk/transaction monitoring

Crypto investing Supporting customer KYC Reporting and analytics

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Maintaining an effective partnership

Finally, look to build a longer-term partnership with your payment technology
supplier. Try to connect stakeholders in both businesses, including product
leaders and commercial functions. A good partner will provide all the people and
resources necessary to ensure customers get the best payment experience, one
that’s convenient, clear, familiar and secure.

Once established, you can go deeper and connect user experience, technology
and operational teams. These deeper relationships can, for example, help make
the flow as convenient as possible for returning customers who have already
achieved a sense of clarity and safety.

A good partnership can also help you better understand how users relate to specific
payment methods. You can use these insights to customise and optimise that
experience, aiming to boost conversion rates. Effective partnerships are also vital to
balance security and convenience, as discussed further in the following article.

Checklist: choosing the right payment partner

Will the tech partner help you provide clear, convenient, familiar and secure
payment flows?

Once the customer has gained familiarity and trust in your payment flow,
can the provider boost convenience and optimise conversion rates?
For example, can the supplier design journeys for different needs
(such as first-time and returning customers)?

What is your tech partner’s experience in your industry?

Do they have testimonials and case studies from similar companies?
Are they happy to put you in contact with comparable clients?

How will your supplier support you?

How will they build relationships with your internal teams, both now and in the future?

What documents or educational resources can a provider offer?

Look for design guides or other technical materials to help you understand processes.

Which programmes does the supplier use to build experience flows?

Can they show you prototypes, templates, defaults and best practice flows designed
in these programmes? Can you edit and customise these to your specifications?

Read more about finding a payments partner that can drive your
payments experience in Open banking payments: a buyer’s guide

Payments experience playbook 15

ARTICLE THREE

Balancing security and convenience

in the payment experience

Strong Customer Authentication (SCA) has made it more

important than ever to design a secure yet frictionless
payments process.
Security and convenience are fundamental customer expectations when making
a payment, but merchants often struggle to achieve both. Balancing these
conflicting priorities is a critical challenge.

The stakes are high: Juniper Research estimates that globally merchants will lose
$343 billion (about £269 billion) to fraud between 2023 and 2027. Ecommerce
losses through fraudulent purchases of physical goods make up about half of this
total, while the next two categories consist of losses linked to financial services
and money transfers, respectively.

The research firm warns that fraudsters are altering their tactics to beat
countermeasures, such as account takeover fraud, which can help them
defeat more advanced account verification countermeasures.

How has SCA affected your conversion rates?

4% 13% 27% 21% 35%

Significant Small No change Small Significant

increase increase decrease decrease

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Security trumps convenience — to a point

Regulators are responding with rules to tackle payments fraud. In the EU and
UK, this includes Strong Customer Authentication (SCA) requirements, which
mandate biometric authentication or text messages to verify some payments.
The Faster Payments bank transfer system now also offers confirmation of payee,
which makes it more difficult for fraudsters to receive payments meant for others.

These measures reflect a broader demand for payment security. Around two
thirds (64%) of consumers said this was the most critical factor in making a
payment. By contrast, 17% said “familiarity and trust of the payment method”
were the most important. Only 6% cited speed and convenience.

And while consumers dislike friction when paying, they’ll tolerate it if it enhances
their safety. Some 56% said they expect more steps when making higher-value
payments. One focus group participant said: “If it's a higher amount, then we
should get at least one authentication step so our details are safe.”

56%
of consumers expect more steps when
making a high-value payment

SCA has harmed conversion rates

But there’s a limit to this patience. Companies offering online payments
must strike the right balance between security and customer experience.
Authentication causes more drop-offs than any stage in the payments process,
with 24% of payment failures happening at this step.

More than half of surveyed companies offering online payment (56%) say
implementing SCA has decreased card conversion rates. In ecommerce, 36% of
merchants described the drop-off as “significant”.

One UK ecommerce customer who typically did online shopping using her laptop
reported problems if she didn’t have her phone on hand or its battery was dead.
“It doesn't seem that there's another option for me to authorise the payment,”
she complained.

How to benefit from SCA

As the survey data reveals, SCA can also offer opportunities for merchants.
Some 17% of companies using online payments said SCA had increased
conversion rates, at least to a small extent.

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So how can merchants turn it to their advantage? Options include:

Enhance trust from consumers: SCA may lead to a long-term improvement

in trust in online payments, but can it benefit individual merchants in the shorter-
term? In ecommerce, 21% of companies reported at least a small increase in
conversion rates. For iGaming, this was 26%. It’s possible SCA has benefitted
newer companies that need to build reputation quickly.

Rework your payments experience: Rodrigo Zepeda, Co-Founder and Managing

Director of Storm-7 Consulting, says it is critical to overcome complexities
in authentication processes to provide secure, convenient experiences.

SCA typically authenticates via the user’s phone. According to Zepeda,

innovative merchants should find alternatives that can make it easier for
customers to complete a payment, making two-factor authentication more
straightforward for every demographic.

Larger firms may have the resources to make this happen. Some 26% of
companies with more than 1,000 employees reported that SCA had caused a
significant drop-off in conversion rates. By contrast, for companies with fewer
than 250 employees this figure was 39%.

Switch to digital-native payments: Ronny Wittig, a partner in consultant Bain

& Company's Financial Services practice, says open banking payments are
constructed to be SCA-compliant from the start. This makes user flows more
seamless and maintains a balance between security and convenience by design.

The lesson from SCA, then, is that companies offering online payments don’t
choose security versus convenience. The best in class offer both.

What are the top three reasons consumers

might try a new payment method?

1
31% Familiarity and trust with brand

2
21% A security guarantee or badge

3
17% Discount or other monetary incentive

18
Payments experience playbook
ARTICLE FOUR

Payment experience advice

from industry experts

Ecommerce Tailor payment flows to each market

Payments expectations vary by country, age, income group and more.

It’s essential to embrace these differences when designing payment flows.

One ecommerce specialist gave an example: “Germans tend to prefer flows

broken into steps as that gives them confidence. UK consumers tend to think
faster is better.”

When designing your payment experience, consider which payment methods

are most popular in your target markets. Different countries use different
payment methods, so make sure you’re offering the most appropriate options.
This will help you cater the experience to your customers’ needs and avoid
unexpected errors.

Finland
69%

Sweden
69%

United Kingdom
55%
Netherlands
55%

Percentage of Germany
49%
consumers who
France
say they are 34%
familiar with “open
banking payments”
Consumers were asked about this specific
Spain
phrase in their local language and were 58%
not given additional help with recall

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Ecommerce
continued

Move at your customer’s pace

Yes, consumers want to speed throughout the payment process. But don’t be
hasty — 29% said they would also feel worried if a transaction happens too quickly.

This is particularly true with big-ticket transactions. A specialist in online grocery

sales recommends running tests with real consumers to gauge their preferences.
Sometimes “positive friction”, slowing down the process, can add reassurance.

“For example, users sometimes say they want to pause before submitting the
payment if they’re making a transaction over a certain amount,” the specialist
said. “But if it’s just £40, they want it to be quick.”

Hidden charges kill trust

When customers make a purchase, they want to know that the price they see
is the price they’ll get. Hidden fees, variable prices or difficulties with discount
codes can upset them, causing cart abandonment and decreasing brand loyalty.

“We have a lot of design critiques trying to figure out how to explain that
an advertised price may not be what you’re charged,” said one ecommerce
payments expert.

Communicating these differences transparently is crucial to building trust

with customers. It can be hard work, but it’s essential to ensure consumers
feel fairly treated.

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iGaming

Be transparent with fees

When customers make a purchase, they want to know that the price they see
is the price they’ll get. Hidden fees, variable prices or difficulties with discount
codes can upset them, causing cart abandonment and decreasing brand loyalty.

“We have a lot of design critiques trying to figure out how to explain that
an advertised price may not be what you’re charged,” said one ecommerce
payments expert.

Communicating these differences transparently is crucial to building trust

with customers. It can be hard work, but it’s essential to ensure consumers
feel fairly treated.

Speed up your withdrawals

Fast withdrawals, payouts and refunds are a major concern for all verticals listed
here, but this factor is particularly important in iGaming. One in four players expect
withdrawals to be instant, and 27% expect to receive their funds within an hour.

iGaming providers already recognise the importance of fast withdrawals — 59%

provide payouts within an hour. But there’s still room for improvement. Payment
methods like open banking can facilitate faster payouts, creating a better
experience for players.

Nearly 7 in 10 (69%) of consumers making payments online want their funds

transferred back to the original payment method. Creating these shortcuts can
quickly improve the payout experience for your players.

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Financial services

Use APIs to automatically fetch signup

information for new customers

Auto-population allows financial services firms to harness the speed and

convenience of one-click payments. As a result, it’s popular among consumers
— 84% of financial services firms that use auto-population benefit from increased
conversion rates.

Auto-population with APIs is creating significant improvements in payment

experiences, according to focus group experts in banking and wealth
management. But in crypto investing, it’s harder to prefill details because so
many currencies, tokens and coins are involved.

“We’re addressing that by encouraging users to follow specific steps because

that leads to fewer problems,” says one expert in the space.

Settle later to accelerate deposits

Delayed settlement can create headaches for financial services companies from
trading apps to asset management firms. A customer can see their money has left
their account, yet it’s not available to use. Their funds are in limbo, which can be
frustrating and concerning.

To combat this, some financial services companies are taking a risk-based

approach, allowing funds to be accessed ahead of settlement. One expert talked
about experimenting with calculating "behaviour points" for a customer and
allowing those with a high total to transact before settlement.

Companies would still need to perform KYC checks and other compliance
measures to pre-approve the deposits. While this can increase risk for the provider,
it creates a more immediate experience for users.

Payments experience playbook 22

ARTICLE FIVE

How to harness open banking

in your payment experience

Consumers are reassured and ready to use open banking.

Are you ready to reap the benefits?
Open banking payments deliver all four key payment requirements: security,
trust, speed and convenience. And consumers have noticed.

Asked about open banking payments (defined as “making an instant bank

payment directly from the website where you’re paying”), more than half (55%) of
UK consumers said they were familiar with it. Only 12% said they weren’t familiar
with it at all.

That level of familiarity breeds confidence. Customers inherently trust payment

methods if they use the word “bank”. As the table on page 25 shows, the word
“bank” can be combined with “instant”, “direct” or “payment” and the result is
the same: around 60% of consumers feel the platform will be trustworthy. In
the UK consumer interviews, one said: “I prefer to pay using the bank. It’s just
more secure.”

Companies across multiple sectors are capitalising on this perception by building

open banking into their payment processes. Some 31% of businesses say they
offer the service, including 30% of iGaming providers, 26% of financial services
companies and 24% of companies with an ecommerce presence.

Part of this popularity stems from the benefits open banking brings to the
payment experience.

“Open banking payments create an easier and safer user experience, which is
important as people increasingly shop online and as fraud becomes more of a
concern,” says Will Johnston, Director of Integration Sales at TrueLayer.

Strong Customer Authentication (SCA) comes baked in with open banking

payments, offering a smoother authentication process for consumers. Meanwhile,
merchants can benefit from increased conversion rates, reduced payment
operation costs and greater efficiency across markets, as Johnston notes.

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“As open banking is pan-European Union, merchants can gain vast efficiencies
by using one payment method across all EU markets, rather than multiple local
methods,” he explains.

What are open banking payments?

With open banking, financial institutions allow trusted and regulated third parties
to access accounts and initiate payments with the customer’s permission. With
the introduction of variable recurring payments (VRPs), it’s even offering an
alternative to methods like direct debits or card-on-file.

In the UK, this involves the use of application programming interfaces (APIs). The
aim is to increase transparency and give customers more freedom and control to
move and manage their money.

Open banking increases transaction speeds, giving merchants quicker access

to funds. But it also offers a better experience for the customer. For example,
through services such as payment initiation services (PIS), consumers can pay
from their bank without entering card details. This helps drive more efficient and
seamless payment experiences.

Open banking complies with SCA by design; it is not an add-on process that
damages the customer’s experience. This benefits all sectors, especially
ecommerce, but also compliance-heavy industries such as financial
services and iGaming.

Who is extremely/somewhat familiar

with open banking as a payment method?

Consumers were told this is “making an instant bank payment

directly from the website where you’re paying”

53% of all consumers surveyed

60% of consumers over 55

67% of UK consumers with income over £48K

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What proportion of consumers says

these payment methods sound very or
somewhat trustworthy?

20% 40% 60%

Instant bank transfer 61%

Instant bank payment 61%

Bank transfer 60%

Pay by bank 60%

Direct bank payment 57%

Open banking payment 46%

By helping merchants avoid using card networks, open banking can also:

■ Reduce hefty fees and operational costs

■ Minimise chargebacks, which are a significant pain point for many businesses
■ Eliminate some forms of fraud because users need to authenticate payment
with the bank

Finally, open banking has a higher conversion rate than cards because it was
designed with digital and mobile use in mind.

Since its debut in 2017, open banking has steadily gained a foothold in UK
payments. Adoption is strong: 9.3 million successful payments were made
in April 2023, compared to 4.62 million payments in April 2022. Currently,
more than 7 million people use open banking each month.

And innovation is continuing. The EU is reviewing PSD2 regulation, which

made open banking available to its 400 million bank account holders.

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In the UK, the Financial Conduct Authority (FCA) and the Payments Systems
Regulator (PSR) are working quickly on proposals to improve information flows,
facilitate further VRP adoption, and much more.

Industries that benefit from open banking

Many sectors have embraced open banking payments to enable smooth and
secure customer experiences.

For ecommerce sites in sectors such as food/grocery, retail, luxury, and travel,
open banking improves the payment flow by keeping customers on merchants’
websites. This enables fast payments through a digitally native, low-cost and
convenient payment method. Customers can also authenticate the payment
directly, providing a highly secure experience that reduces the risk of chargebacks.

In financial services, online wealth management and trading platforms

can verify account ownership and authenticate payments directly with
a customer’s bank. This reduces the risk of fraud associated with other
payment methods like cards, boosting user trust.

In iGaming, open banking enables rapid pay-ins, extensive security and

reduced fraud. For example, it allows customers to use biometrics to
authorise transactions, including deposits and top-ups, quickly and safely.

Barriers to open banking payments adoption

While open banking payments adoption remains strong, merchants can still face
challenges in implementing it successfully.

Merchants’ perception of the top three

drawbacks to payment via open banking

25% 18% 17%

Security Confirmation of payment Total costs

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After security, the top barrier to using open banking payments among merchants
was difficulty getting confirmation of a submitted payment, an obstacle cited by 19%
of respondents.

As TrueLayer’s Will Johnston notes, the problem is exacerbated when instant

payment rails aren’t available. This is especially prevalent in Europe, leaving
merchants unaware of when funds arrive.

“But as the EU catches up to the UK, the direction of travel is towards instant
payments,” he notes. “This barrier will decline significantly.”

Even when settlement is not instant, it may be possible to estimate the likelihood
that payment will complete. This would then allow merchants to decide whether
to provide the goods/services ahead of receiving the funds.

The second-highest barrier, at 18%, was the perceived security of payments.

This is despite open banking featuring built-in authentication and being fully
validated by regulators and central banks.

“That perception is due to a general unfamiliarity with open banking,” says

Johnston. “As it continues to gain traction, more and larger merchants will go live
with it, and that security barrier will disappear.”

Overcoming the barriers

While payment confirmations and perceived security risks remain a challenge,
companies in a variety of sectors are already finding ways to address them.

In the expert focus groups, one specialist in iGaming ran an email marketing
campaign to increase open banking payment adoption, which increased its
market share from 1.5% to around 6% in the UK.

Another gaming expert used an inline frame (iframe) — an HTML element

that loads other content in-page — to keep users within the payment flow.
And another implemented faster deposit methods to save details and improve
the flow of the open banking process.

Many of these measures can be adopted by other industries, such as financial

services and ecommerce.

While each method has the potential for success, it’s essential to tailor your efforts
to your business’s needs. As Johnston notes, a practical open banking partner
can support you in those efforts.

“A good open banking payments provider should have experts available to

advise you about the user experience and marketing improvements you should
make to drive adoption,” he says.

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Disclaimer

Statistics, research and recommendations

are provided “as is” and are intended
for informational purposes only and
should not be relied upon for operational,
marketing, legal, technical, tax, financial
or other advice. TrueLayer does not
make any warranty or representation as
to the completeness or accuracy of the
information within this document, nor
assume any liability or responsibility that
results from reliance on such information.

The information contained herein is not

intended as legal advice, and readers
are encouraged to seek the advice of a
competent legal professional where such
advice is required.

All brand names, logos and/or trademarks

are the property of their respective owners,
are used for identification purposes only,
and do not necessarily imply product
endorsement or affiliation with TrueLayer.