Open Banking Developments – Updating Payments – [FULL INTERVIEW]

Stefan van Calker from Tink discusses the latest developments in open banking and its increasing integration across various sectors.
He highlights the evolving landscape of open banking payments, their growing adoption, and the integral role of data integration in enhancing financial management. Emphasizing the benefits of inclusive payment methods, the strategic importance of preventing fraud, and the need for the UK to maintain its lead by adapting to European regulatory changes such as PSD3. The conversation also covered future developments in variable recurring payments and the potential for accessing broader data pools to enrich financial insights.

Key Points

  1. Stefan van Calker serves as a Business Development Manager at Tink, primarily focusing on the payments team and overseeing markets in the UK and Europe.
  2. He emphasized the successful adoption and evolution of open banking payments through strategic partnerships.
  3. Open banking is seen as beneficial for high-value purchases with features like affordability checks.
  4. Data integration within open banking is enhancing payment scheduling and financial management.
  5. Increased adoption of open banking is noted in the utility and telecommunications sectors.
  6. Open banking has significantly contributed to fraud prevention through enhanced account verification and customer authentication mechanisms.
  7. It facilitates accurate income verification, preventing fraudulent claims and false rejections.
  8. The UK remains a leader in open banking, but other European markets like the Benelux and Scandinavia are quickly catching up.
  9. Discussion on the potential impacts of PSD3 and open finance on maintaining competitive parity with Europe.
  10. The future of open banking includes variable recurring payments and access to broader data pools like loyalty points.
  11. Challenges in rolling out commercial variable recurring payments due to the need for more banks to participate.
  12. The integration of data products with open banking payments could help alleviate the cost of living crisis for millions.

Key Statistics

  1. Approximately 51% of surveyed customers desire more control over their bill payments.
  2. About 70% of customers would consider switching providers for the flexibility to change bill payment dates.
  3. More than 10 million UK consumers are struggling to pay their bills monthly, highlighting the severity of the cost of living crisis.

Key Take Aways

  • Open banking is increasingly becoming a fundamental part of financial ecosystems, offering substantial benefits across payment methods and fraud prevention.
  • The adoption of open banking in sectors traditionally less engaged with innovative banking solutions, such as utilities and telecommunications, underscores its broad applicability and potential.
  • Data-driven features within open banking are not only enhancing transaction security but are also providing crucial financial insights that can assist consumers during economic hardships.
  • With the ongoing development of regulations like PSD3, the UK must continue to innovate to maintain its leadership in open banking.
  • The exploration of new data integration possibilities, such as incorporating loyalty point systems, could further revolutionize consumer financial management.
  • Despite the enthusiasm around variable recurring payments, the practical implementation is still facing hurdles, primarily due to the slow onboarding of banks.
  • The strategic importance of educating consumers about the safety and benefits of open banking remains paramount to its broader acceptance and trust.
  • Open banking is positioned as a key tool in addressing the ongoing cost of living crisis, providing tailored financial solutions that can adjust to consumers’ varying financial situations.

Find out more about Tink -> Here.

Interview Transcript

0:04
Hi, everyone, I’m here with Stefan van Calker. He’s works for Tinker in the open banking space, and you’re in the business manager looking after payments. And I think you still have responsibility for the UK market as well.

0:15
Yeah, that’s great. Yeah. Great to see you again, Chris. I’m Stefan. I’m a Business Development Manager in the payments team at sink needs, mostly looking after the UK market. And that’s really a couple of European marks as well. Right? Yeah, looking with partnering with companies in the telco space, utility space, PSPs, and so on, and so forth. So what’s new in open banking? I know we chatted before and there’s been a lot of excitement around getting the additional information, open banking payments, recurring payments as well, I think all of these things have been swirling around where things developed over the last, you know, couple of years since we last chatted. Yeah, absolutely. I think it’s a really good question. I think everyone is still like talking a lot about the potential of open banking, particularly in the payment space, right? Where are we today? What’s going to come? I think there’s been not just a thing, but like many open banking platforms, and only not in the UK, but also across Europe, things have been boiling, of course. And what we have recognised I would say in the past six to 12 months is that we actually getting quite successful. And when it comes to partnerships, so let’s say if a merchant or an E commerce or like an ISA wants to go live with open banking payments for the well, benefits that we are all aware of, they actually might actually go for like an IGN, or stripe or maybe a local PSP and use things open banking, or like pay by bank methods. That way, we of course, like there are like a couple of use cases where it also makes lots of sense to partner direct, let’s say in the bill payment space, or with top offs, countertops, for instance, or maybe in the remittance space, lots of things moving there as well. But I think that’s that’s what we see. And I think especially together with PSPs, we see that yeah, the open banking payment method is really getting adopted right now. And that’s really exciting to see, payments just seem to have really taken off, even since we last chatted just is coming through much more. And I suppose there’s a cost competitiveness around that, in terms of light versus card payments, and those so from a merchant point of view, or from a vendor point of view than that, is that where the main competitors coming in was why it’s being adopted so widely. Yeah, I think it’s a lot about customer choice, as well as having an inclusive payment methods, right? Because maybe not everyone has their like card ready, not everyone’s maybe has a credit card as well, or something like that. And paper bank is like a very much an inclusive payment methods here as well, I would save so where it’s, I would say Sure it does compete with other payment methods as well, I think are the other ends as well, for some use cases, open banking payments, just make the most sense thing, especially off the high value purchases, right? Someone wants to maybe say buy a kitchen or buy a car or anything like that, like a piece of furniture. That’s where it makes lots of sense. And think of the power of not just payments. But I think there’s like a lot of potential in also in combining data products. So let’s say if you want to buy a kitchen, can you actually afford this kitchen, especially now the cost of living crisis where lots of people are actually struggling to pay their bills? How easy is it to do like a one off affordability? Check to see if someone what someone’s income streams or expense streams are? And then understand, okay, can someone afford this kitchen? And if not, should we maybe set up a payment plan. So that’s like lots of things. Now, I’ve already got deviating from payments a little bit. There’s lots of things in the space that are interesting. So So that’s interesting. So it’s rather than just the payments, and I suppose the cost of the payments is also the fact you can get a much richer data stream associated with that payment. And then I suppose of course, the other thing that we’ve chatted about before is the fact it’s often embedded within a process, you can actually do things like reconciliation is easier. So the lights and light back office benefits, but it’s also that the extra data that you’re actually going to get as a result of the payments through open banking. Yeah, exactly. I think. And within open banking, this is basically built on two concepts like payments, initiated services and account information services when the thing within the account information services think has moved builds lots of tools, mechanisms, data enrichment on top of that, basically, because if you would like as a merchant get access to the whole pool of raw data, you would think, okay, how can I actually make sense of the data? How can I make it consumable? And I think by packaging the product in such a way that you can detect income streams, okay, is this like a frequent stream that comes back or someone receives salary every month, every week, something like that, or it’s like a regular expense stream coming out. And based on that, what may be the best day to charge your direct debit, for instance, or the best day to collect the payments. And that’s a very interesting way of and again, especially in the light of the cost of living crisis. It’s just so important to pay a bill and someone actually can afford it. Instead of charging it when that person may be paid for your bills yesterday already as well.

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5:00
In that way, it’s very much a tool that can be used to help people distress also a little bit. And in terms of adoption and trust, it feels like trust is increased. But then we also seen increased adoption from almost like the company side as a result of cost of living. Is that driven additional interest you finding in the whole open banking product because of the data stuff? Which exactly what you’re saying? Yeah, absolutely. I think that there’s a couple of like companies and industries that we have, like more as, like more traction than it was before. I think, originally, open banking, and it’s all the word right, it’s very much like utilised by financial services. I think over the past 12 months, we haven’t like more partnerships, but also more like conversations with companies in the telco space, or the utility space, but also water suppliers, for instance, because talking about the topic of stress, actually, I attended a utility customer summit in Birmingham a couple of weeks ago, and a lot was being spoken about the consumer trust, actually, the trust in YouTube is actually decreasing nowadays. And it’s simply because they need like, more help with the bills, and it takes customer support centres to actually it takes more time to help customers with their bill. So what can you actually do to help restore the trust, and one of the research that we that we’ve done recently is that it’s around like the core cost of living crisis, now I’m open bank can enhance the experiences. And we found that about half of the service customers, about 51% of the customers want more control over how and when they actually pay their bills. So especially that utility bills here, and 70% of customers would actually consider switching providers, if they’re able to change the dates of their bill payments, right, because direct debit is very, very rigid, it’s the one day per month, that’s why we charge to direct debits. But it imagined that you can actually do like a check someone’s bank accounts balance prior to collecting the bill, that would distress the customer so much, because maybe it’s just like that couple of days difference when someone gets a salary, and someone might be able to pay the bill, that really makes a difference for someone to actually make sure that thing, they also do their groceries by the end of the week. So there’s lots of like, power insights, of course, payments, great, lots of distractions happened in the home and continue to do so within the data products, combining the both of them, there’s a lot of power in there, too. I’m not saying to relieve people from the entire burden in the cost of living crisis, because there’s so much to it. But it’s definitely helps to make make life easier of and customers but also businesses in the US was the fine tuning around payments from when they go through and just all of that customer kind of interaction a little bit. So you mentioned before a little bit about fraud, I think we’re gonna get you just like into like how it can be used to like prevent fraud, fraud has been pretty much high on the agenda recently as to a certain extent, I suppose, as a consequence of cost of living, isn’t it as well, which is you can like people come over to here, people going more online and those kinds of things. Just do you think do you think is there’s an opportunity to that you’re getting approached around like how it can be used to protect customers from fraud as well? Yeah, yeah. It’s an interesting point. So what we see for instance, that you can, let’s say, when you are a remittance platform, or maybe crypto platform in that space, and you collect payments, but then you also want to make payouts, so in order to actually comply with regulations. Also make sure that you’re actually paying out that funds to the right person, you can with an account verification, you can basically, programmatically validate account ownership rights. So we return data, such as account holder account number and sort code. And you know exactly that person is the person who actually owns the account because they’ve done the strong customer authentication with the mobile banking app as well. And there’s no no chance for fraud pretty much that’s pretty much eliminated. So I think from the fraud perspective, yes, definitely. There’s like lots of things that can be prevented there. When you look at the payment side of things. Similar case, right, because every single payments, every single payment initiation is authenticated through the mobile banking app, as opposed to filling out card details, for instance, where that’s like more prone to fraud, basically. So there’s like definitely fraudulent pay. Yeah, fraudulent payments that can be prevented that as well. And I would say firstly, as well, like another use case that we see basically, is when let’s say that someone applies for a mortgage, and the bank is asking for to do an income verification, for instance, cannot actually someone afford to pay this to pay this mortgage. But we see that some banks and lenders they’re actually still asking for like screenshots of their bank accounts, or they ask someone to fill out the details manually. How easy is it to actually force screenshots or just fill out details not knowing whether they’re right or not? By doing a simple one of income verification, you know exactly whether the details are right or wrong, not only to actually how to say, get people

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10:00
to take out a mortgage that may be unable to afford it, but also for false negatives, right? So imagine that someone does not have a complete view of all the income streams coming in, and maybe it’s getting something and it gets rejected for the wrong reasons. Open banking. Yeah, it’s a lot of it’s a long answer to a short question. But as love potential data, yeah, suppose that sounds like it’s fraud from protecting in terms of payments coming in, because the funds are going to be cleared and all of those kinds of things, but then it’s also protecting the consumer as well, because particularly making a large payment, where it’s going to where it needs to be because it’s got extra security around it, which is interesting. And in terms of like development, I just asked you, obviously, you guys look across the whole of Europe as well, the UK has been quite quite advanced in terms of open banking, but a couple of conversations recently saying that there’s definitely more your movement happening in Europe, and we’ve got open finance sitting in the background, and it is the certain amount of risk around us like maybe falling a little bit behind because there’s the other markets are catching up pretty quick. And I know, like in Scandinavia as an example, this is always pretty advanced anyway, were you seeing like new developments or things that ticularly the UK industry really needs to think about in terms of extra adoption versus what you see elsewhere?

11:11
Hmm, yeah, that’s a that’s a good question. Chris. I think UK is still definitely a leading markets in the open market, no doubt about it, both from a perspective, but also businesses that have actually implemented soap making payments, for instance, but also the quality of the API’s and the data that we get from the banks. But there are definitely markets I would say the Benelux that region. Scandinavia, as you mentioned, as well, definitely catching up there. And think right now there’s lots of talk about like PSD free open finance, what’s happening there? What’s what’s next, of course, I think as long as the UK adoption is like, growing assets, as it does, and really having a more widespread, I’d say adoption of like open banking payments. I think I don’t I’m not saying there’s like a silver bullet or anything like that there because there’s so much it’s maybe it’s too early to say, where can the UK particularly jump out compared to the rest of the market? Because it already does. It has been already been like a little bit ahead, I would say. So I think like, we should just continue as we’re doing I think commercial variable recurring payments, that’s definitely something if UK wants to stick out somewhere, then that’s definitely it. Speaking a lot about potential lots of panels are about that. But we’re still waiting for more banks to get on board. Yeah. And I suppose it’s just if you’ve got PSD three coming up, and obviously the European legislation is moving ahead. It’s just making sure obviously, the UK legislation stays at the same pace all the way through and doesn’t fall behind. It’s probably the nervousness to certain extent. But as we it needs to be top of mind for us here is making sure that we’re looking out and seeing what else is being done elsewhere. How can how can we stay as competitive as need be? Really? Yeah, absolutely. And I think like in the future, what you can think of, for instance, doesn’t need to be like NPC free or whatsoever, but that you get like access to even more data pools, right, right. Now we get access to data that was before we’ve isolated someone’s bank accounts now through think any other party can can access it. But think of data pools that you for instance, have like loyalty points at a supermarket or at Starbucks or a fuel station whatsoever, right? What’s the value? That’s like lots of value, and that if you could get access to that data as well and aggregated with financial data? Think of what you can do there. So that’s that could be Yeah, very interesting as well, I think it’s quite interesting thing, because like open banking has provided, you know, a framework in what’s a very sensitive area of people’s bank accounts. And it provides a framework to actually exchange some of that data, and there’s huge amounts of value in it. But to do that to other areas, maybe even though it may be a little bit less critical, like loyalty points as an example, how do you compare that versus your bank account is similar, if not the same as certainly similar. But it’s a framework to get you access to that extra data to be able to share it and then do things with that can benefit the consumer is quite interesting. Absolutely. I agree. And I think like this privacy topic is always a sensitive one, right. And I think like in banking in general, and that will also be in when you get access to other types of data pools, you always need to like educate the customer for what’s about to happen. Of course, the work that we do, on our end, connecting to the banks API’s, or having a smooth authentication journey is very important. But we see more and more especially in markets with consumers that are more like outside privacy sensitive, I would say, it’s just very important to have a UX design that is basically educating the customer for what’s to come, your bank account is getting connected. How does the journey actually gonna look like? And this is why this journey is safe and why the data is in good hands. And over here, there’s been a lot of excitement as far as around variable recurring payments, just trying to get that on board. It feels like that’s stalled a little bit recently, but it was brief comment really around like, where are we with that? Do you think particularly in this market? Yeah. Yeah, absolutely. And I think in order to answer the question, I think it’s good for everyone to understand that like swivel, they’re sweeping variable recurring payments.

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15:00
comes to account payments, right between your own accounts and commercial variable recurring payments that the former is like available for CMA nine. But the latter commercial burial or recurrent payments is what everyone is very excited about, of course, and I think definitely publicly that has been a little more silent perhaps when it comes to like concrete actions that are being taken and more banks life, because that’s what many people are waiting for. Behind the scenes, I can definitely confirm there’s still a lot happening that we are still

15:29
talking with pretty much every bank out there, I would say, to get more banks on board, but it’s Admittedly, it takes more time than we then we expected. On the other hand, we also want to use the time to make sure that they are Yep, proper agreements in place that are sustainable for the future, as well as a future as well. Of course, yeah, I would say Sit tight is definitely going to come. And I think we are like in a great position as part of the visa group as well, because Visa has, of course, relationship with every single bank out there. So that puts us in a good good spot. However, yeah, we’re still waiting for the potential to be to be flourishing. Yeah. So despite the excitement’s still hold on to the excitement that it’s going to be a little bit while yet. So be a little bit patient, but it’s on its way.

16:14
Yes. Very, very good. So if we look out over the next little 812 18 months, what are the big topics that you got on your roadmap? Or that you’re thinking about that we’ve really got to be, you know, be aware of?

16:26
Yeah, absolutely. So I think apart from like, commercial variable, recurring payments, that’s very much in the topics of okay, how can we still work on an even further development of open banking payments? And how does Can these be rolled out either directly with an open bank platform such as think, or through partnerships PSD or PSPs, gateways, orchestration platforms, and sounds really drive open banking adoption, not just in the UK, but also across Europe? And globally? Ultimately, I think the second thing is, again, what we’ve spoken about is very much in how can you fully use the power of data products and open banking payments together to help people through like the cost of living crisis, right, it’s no secret that I believe it’s like over 10 million consumers in the UK right now they’re struggling to pay their bills every single month. And I think that’s, that’s it’s almost not like a cost of living crisis anymore. It’s like a, I don’t wanna say like a national crisis. But it’s something that’s where open banking can definitely help to reduce the burden. So to say, if, like your insurance company, or your water firm, or anything like that really understands the financial situation that a customer is in how easiest than to just move the direct debit dates to a different days where they can actually where a customer can actually pay the bill, or set up a tailored payment plan in order to meet someone’s personal financial financial situation. I think there’s a lot of outside potential in that as can still be unlocked. And that we are Yeah, hopefully, we have a couple of very interesting partnerships in the pipeline that we want to go out with this year, of course. And yeah, that is something that we are very excited about. I would say I would say it’s a fascinating topic. And you can see, despite all the excitement there is about it, that we’re really getting into the the execution phase, right? So you get into the detail arounds, I actually actually see it on your bank account, you see it embedded into customer journeys. And so it was like we’re in that sort of like delivery phase. It feels like now so. So it’s still excitement. So still sounds like there’s a lot of work going on in the background. Huge amount of work. So we just got to watch the space of thing. Absolutely. Stefan, thanks very much for joining me, I appreciate that. And it’s great to get a bit of an update and to catch up a little bit. So thanks very much. Awesome. Likewise, Chris. Thanks so much.


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