I N D U S T R Y
O U T L O O K interchange fees , Open Banking payments impose costs on banks without offering a direct financial return .
I N D U S T R Y
O U T L O O K interchange fees , Open Banking payments impose costs on banks without offering a direct financial return .
Not only do these transactions threaten traditional revenue streams from cards and direct debits , multiple third-party providers ( TPPs ) have also flagged to the Open Banking Implementation Entity ( OBIE ) that high ticket size Open Banking transactions in the UK are more often declined through the fraud engines of banks , compared to the same value ticket size card transactions .
For Open Banking to flourish , banks must be incentivised to actively support its adoption . Regulators , such as the Financial Conduct Authority ( FCA ), must work closely with industry stakeholders o develop a sustainable commercial model that balances banks ’ interests with the broader goal of driving innovation . Central bodies like the Open Banking Implementation Entity ( OBIE ) can also play a key role in fostering collaboration and overcoming the current impasse .
Open banking cost models
In designing reforms , regulators should consider how to retain the low-cost nature of early Open Banking models with the additional services that come from TPPs and merchant accounts . Early models saw funds flow directly from the consumer ’ s bank to the merchant ’ s account . However , this had limitations for merchant and customer experience , such as a lack of support for refunds , transaction tracking , or reconciliation services .
As a result , TPPs began collaborating with banks and e-money providers to set up merchant accounts , offering services like refunds , webhooks to release goods and reconciliation tools . While these improvements made Open
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