Open Banking, you’ve probably heard of it by now. Put simply, Open Banking is a framework that enables banks and financial institutions to share consumer financial data with other regulated providers securely in order to create more personalised services and value for consumers. It’s a particularly revolutionary milestone for payments as licensed third parties like Vyne can enable payments directly from the consumer's bank account, creating competition in the financial services industry and driving a better service for consumers and businesses alike.
With Open Banking, businesses are paid quickly, securely and at a lower cost, while consumers use their own banking app which provides security and trust, as well as a seamless payment experience.
Why are Open Banking payments important for the travel money businesses?
Year-on-year the number of Brits taking holidays abroad is increasing, according to Yonder, last year 57% of consumers said they would take an overseas trip despite the cost of living pressures. When travelling, budgets are also increasing as, according to TravelWeekly, almost half (46%) of Europeans have increased their travel budgets compared to pre-pandemic.
As consumers search for the best exchange rates and speedy service, travel money businesses need to offer their customers the best rates, quick delivery and seamless payment experiences to stand out from the competition. Unfortunately, for a lot of travel money businesses payments are a pain point due to high-cost card fees, slow settlement and clunky payment experiences. Here are three ways Open Banking can benefit travel money businesses and their customers.
1. Reduced transaction costs
Cutting costs has never been more important. Relying on traditional payment methods is making it increasingly difficult for travel money businesses to save with costs anywhere up to 3.5% fees on card transactions.
Open Banking powered account-to-account payments allow travel money businesses to avoid the high-cost transaction fees associated with cards, as the payment goes straight from the consumer’s bank account to the business’ account within seconds. Depending on card fees, Open Banking payments can save travel money businesses up to 80% on processing fees. This results in significant savings and the ability to continue to offer customers the best and cheapest rates.
2. Boost cash flow with instant settlement
It’s no secret that slow settlement is a pain point amongst travel money businesses as it’s usual to turn around payments on the same day. Traditional payment methods like cards can take up to three days to settle, heavily impacting cash flow and reconciliation.
With Open Banking, payments land in the business account within seconds, allowing travel money businesses to turn cash around on the same day and keep a grip on real-time cash flow.
3. Boost conversion with cardless payment experiences
Time is money in today's fast-paced world. Customers are demanding quick and even instant experiences and if anything slows them down, they drop out to go to a competitor. With Open Banking, the payment journey is streamlined by removing unnecessary friction, like manual card data entry. Instead, customers make payments with bank-level security using their mobile banking app or online banking in just a few taps, removing the need for cards or manual data entry.
Open Banking can also increase customer sentiment by improving the process when buying back consumers’ travel money. 70% of consumers we surveyed said instant refunds would be important to them if they could build their ideal payment method. This poses a problem for a lot of travel money businesses that use traditional methods which don’t have the capacity to offer rapid refunds. Card payment refunds can take up to five days to land in customers accounts, and for digital wallets, often longer.
Payments made through Open Banking can be refunded instantly, meaning customers can receive their travel money refund in a matter of seconds, improving customer sentiment and the potential of returning customers.
Open Banking has grown by 104% in one year
So, why should travel money businesses evaluate Open Banking now? In July 2023, Open Banking payments hit an all time high with more than 11.4 million payments processed in one month. The number of active payment users also reached 4.2 million, showcasing an impressive 68.2% surge from July 2022. Open Banking is growing at a rapid pace, driven by early adopters in retail, e-commerce, gaming and financial services.
With Open Banking payments on the rise, now is the perfect time for travel money businesses to explore the payment option that can help reduce transaction costs by 80%, improve cash flow with instant settlement, and boost conversion through cardless payment experiences. But don’t just take our word for it; 55% of TravelFX customers choose to pay with Open Banking powered payment option Vyne Pay with bank. TravelFX also finds the reduced transaction fees through Vyne to be a “huge benefit” as they’re able to “absorb the cost” and offer customers the best and cheapest rates, all whilst “maintaining operational efficiency” as Vyne Pay with bank transactions settle within seconds.