Open Banking is taking the world by storm with promises of better, cheaper financial products and services. When looking at Open Banking and Contactless (PayWave, Tap & Go) transactions from a Point of Sale (PoS) point of view there are distinct Pro's and Con's for each method, here we outline some of these.
Contactless
Includes; NFC Enabled Credit/Debit Cards, PayWave, Google/Apple Pay (Phone), Tap to Pay, Wearables.
Pro's | Con's |
Incredibly quick and easy, no need to enter a PIN (just tap a Card). | Transaction costs can be high especially when the transaction value is large. |
Suits smaller value, higher frequency transactions. | Not all Merchants accept contactless payments, small transaction limits. |
Improves Customer experience and has widespread adoption/acceptance. | Cards can be lost or stolen and used before cancellation. |
Security through encryption and tokenization. | Surcharges! |
Can include Rewards or Cash Back |
Overall when making low value, high frequency transactions the benefits of speed, ease and convenience with Contactless can far outweigh the negatives of transaction costs or surcharges because the sale has a far greater chance of being made.
Open Banking
Banks provide 3rd party service providers (like Payminty) access to customers financial data via API's. Products include Online EFTPOS from Wordline.
Pro's | Con's |
Low cost transactions and often no surcharge applies (or at least its less). | May require more steps to authenticate a payment, increasing abandonment. |
Customer consent, meaning as a paying customer you must give explicit consent to share your information with 3rd Parties. | Banks (especially in New Zealand) are slow off the mark and lack standard terms for bi-lateral contracts. |
Enhanced services and more personalized financial products. | New technology that has yet to reach mass market adoption. |
Improved competition may lead to better products and services at lower prices. | Generally lacks any rewards or cash back incentives. |
Overall when making high value, low frequency transactions the benefits of reduced costs and potentially nil surcharges is especially attractive with an Open Banking transaction. However the additional steps (friction) to authenticate an Open Banking transaction means there is a cost/benefit threshold relative to the value of the transaction and any potential surcharge.
Summary
It's clear there are benefits and shortcomings for each method and ultimately it comes down to a Merchants ability to provide their customers preferred payment method depending on their personal circumstances.
With the Payminty+ app a Merchant can key an amount to pay and show a unique QR Code on their mobile device (iPhone and Android) for a customer to scan with their mobile device. This can present multiple ways to pay including Google/Apple Pay (Credit/Debit Card) or Open Banking as per below. Dynamic surcharging can clearly spell out what the total payment is for each method, giving the customer the ultimate choice i.e. pay fast and easy or save on fees.
Get in touch with us on info@payminty.com if you would like to explore how you may be able to offer your customers both Contactless and Open Banking payment methods for your business.
Note:
The above example is a Merchant configured with Google/Apple Pay from Stripe and Open Banking from Worldline using their Online EFTPOS product. The Merchant has keyed in an amount of $120.00 with a 1% ($1.20) surcharge being applied to Google Pay and a nil surcharge if paying via Online EFTPOS (Open Banking).
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