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Unlocking account-to-account retail payments – Access and reliability

Technical Specialist Nicole Coates considers what consumers and retailers need in order use account-to-account payments for retail purchases confidently. 

In an earlier blog post, our interim Head of Policy, Kate Fitzgerald, set out how account-to-account payments can increase the payment choices for retailers. We believe there are four issues that need to be addressed to promote account-to-account retail transactions using open banking. Here we discuss how to ensure they’re both available and reliable. 

Functional
capability

Operational and technical standards meet the functional requirements for retail transactions. This, for example, includes the ability for the retailer to support subscription payments.

Dispute
processes

Consumers are suitably protected when making account-to-account payments. All parties involved in the transaction act together to minimise payment risks, and put in place the right processes to ensure that people feel safe when using account to account payments because they know what will happen if things go wrong.

Sufficient access and reliability

People and businesses feel comfortable making and accepting account-to-account payments because they are quick and convenient. This means that there is sufficient availability across the end-to-end journey for a retail transaction and customer drop-outs are at a low level.

Competitive
pricing

Account-to-account payments support competition and provide commercial opportunities for businesses involved in the transaction. A sustainable pricing model for retail transactions ensures firms can continue to invest in new products and further innovation that benefits people and businesses.

Customers and retailers must be confident that they easily understand how any payment service they use works and have confidence that it will work reliably. Retailers need to know their customers want the service and be reassured that they’ll be paid. Without these assurances, people simply won’t use the service. 

We want people and businesses to feel comfortable making and accepting account-to-account payments. We also want to ensure that the system works well for a retail transaction. So, it’s critical that these transactions meet people’s expectations: it must work, be simple to use, and be widely available. 

We expect that account-to-account retail payments will initially be based on existing open banking and payment infrastructures. The Strategic Working Group (SWG) will assess what additional developments are needed to better suit the needs of consumers and retailers. 

Let’s take one example. Open banking relies on a method of sending information between different computer systems called application programming interfaces (APIs) to function. In open banking payments, APIs enable a payment initiation service provider (PISP) to securely exchange information with an account-servicing payment service provider (ASPSP); this might be to request data or initiate a payment. 

Currently, open banking APIs work in 97% to 99% of cases.1 The 1-3% that don’t work are down to various reasons, including technical integration issues, maintenance schedules or simple reliability. It’s arguable that this level of performance is good enough for most open banking scenarios today – but there are millions of consumers and retailers, making millions of transactions. We’ve asked the SWG to consider if this level of API availability needs to improve – and if so, why, and how?   

The SWG will examine the full transaction flow to identify gaps in reliability and access. It will look at areas where payers might abandon transactions before they make a payment, and areas where payments could be delayed or fail.  

One area we want to investigate more closely is the payment infrastructure that we expect account-to-account payments to use: Faster Payments, and its successor based on the UK’s New Payments Architecture (NPA). The way Faster Payments has been implemented varies widely. Many ASPSPs operate it on a reliable 24/7 basis.  However, in other cases large regular maintenance windows interrupt the service (for example, connections between some clearing and agency banks). 

As part of the SWG’s deliberations, we have asked it to consider where access and reliability could be improved by posing four key questions: 

1) Where might account-to-account retail transactions fail?

This might include payment selection, customer authentication or API reliability. How can the industry minimise the risks? And will the benefits of a solution outweigh the cost?  

For example, it may make better sense to accept an existing level of technical capability in Faster Payments if the cost of improving it outweighs any benefits. 

2) How can PSPs ensure that the payment journey minimises user dropout?

We understand that friction in the payment journey is a significant cause of people abandoning their shopping cart or basket. PSPs and retailers alike have made removing that friction a key focus. To effectively compete against established PSPs, those offering account-to-account retail payments will need to understand where friction happens and minimise it.  

3) How can retailers be confident the payment will happen?

Market feedback tells us that retailers need clear information on whether and when a payment has gone through, and to be certain when they will receive the payment. This gives them the comfort they need to complete the transaction with their customer. What form should this information take, and how PSPs implement it? Retailers have also said that inconsistent implementation and user journeys affect usability and customer acceptance. 

4) Is there sufficient capacity, now and in the future, to support the uptake of account-to-account retail payments?  

In 2021, consumers made around 29 billion spontaneous payments, mostly to retailers.2 If account-to-account retail payments prove popular, Faster Payments (and by extension the NPA) will need to be able to cope. The SWG will need to think through how to address any potential capacity choke points and what it would take to mitigate the risk to the overall service’s growth and performance. 

We think that an account-to-account retail payment service is more likely to succeed if it’s simple for people to understand and use and gives consumers and retailers a high degree of confidence that it will work quickly and first time. We look forward to discussing how we can make that a reality with our stakeholders. 

If you’d like to tell us how access and reliability in a payment service can help unlock account-to-account retail payments, please contact us at A2A@psr.org.uk 

Notes:

OBIE data 2022

2 UK Finance: UK Payment Market Summary 2022