The new service is an alternative to card payments and takes advantage of the European Union’s Payment Service Directive (PSD2) requirement for banks to create APIs for approved third parties to initiate payments on behalf of consumers. Adyen is one of the early adopters to launch a PSD2 API payment method that provides direct APIs into leading UK banks: delivering access to more than 90% of consumer accounts in the UK.
Launching initially in the UK, but with scope to be rolled out into other European markets, Adyen’s new solution is simple and secure. Open banking payments are authenticated directly between consumers and their banks, meaning, unlike with direct debits, merchants can avoid chargebacks generated due to fraud or an inability to capture funds.
It works in a similar way to most online banking methods. A customer simply selects the payment type during the checkout process, at which point they are redirected to their bank’s online banking environment to securely confirm the payment.
Their bank utilises the customer’s preferred method of authentication – such as Face ID, Touch ID fingerprint recognition, or an online banking password – which enables the funds to be pushed directly from the consumer. This facilitates direct authorisation between the shopper and the merchant, and Adyen handles the payment flow between the bank and the merchant. The system unifies hundreds of individual bank connections behind a single integration, ensuring a fast, secure settlement of funds.
Due to the direct nature of this new payment type, existing processing costs for higher transaction values can be significantly reduced. Payments powered by Open Banking also offer real-time credit transfers, guaranteeing the payment and enabling merchants to ship the product immediately – something that was previously impossible with traditional direct debits.
“Adyen constantly strives to innovate and simplify the payments process for consumers and merchants,” said Myles Dawson, UK Managing Director of Adyen. “Bank transfers between consumers and merchants are already extremely popular in mainland Europe because they offer greater fraud protection without adding friction to the payment process. We are excited to be the first payments provider to offer a fully-compliant, direct payment solution in the UK and it has been great to work with the Open Banking Implementation Entity to bring these benefits to consumers and merchants.
“It is exciting to see another great example of open banking powering innovation and leading to new services which ultimately help drive efficiencies in payments.” said Imran Gulamhuseinwala OBE, Trustee of OBIE (Open Banking Implementation Entity). “Using Open Banking, Adyen is a great example of how consumers and organisations can benefit from increased collaboration and secure data sharing between financial institutions.”
Dutch airline KLM is the first major brand to rollout the new offering – the service is now live for its UK customers.“It is great to see that KLM is the first airline to offer this open banking payment option to our UK customers. After our home market, the UK is our most important foreign market. By working with Adyen latest payments initiative, we are offering our customers a wider choice of payment options in a secure and seamless way. Our customers can choose their preferred payment method whenever shopping online at KLM. This way, KLM remains its front-runner position in the online payment industry”. Pieter Groeneveld, Senior Vice President at KLM Royal Dutch Airlines