Businesses are demanding more cost-effective and secure payment methods that do away with the “unfair” chargeback model, according to a new report by open banking infrastructure provider, Yapily.
The research, carried out by YouGov for Yapily and which surveyed more than 2,000 UK consumers and 250 merchants, shows that 77% of merchants say transaction fees are a big concern when choosing a new payment method. Over two-thirds (68%) say the risk of fraud is a significant consideration, while over half (54%) flag the risk of data breaches as a key concern.
Two-fifths of businesses believe the current chargeback process is too skewed in favour of consumers. Almost half (49%) wish the process were more efficient, and a staggering 41% want it scrapped entirely.
Shoppers surveyed say their biggest concerns centre on convenience and security, with the majority calling for safer, simpler ways to pay – especially for everyday, low-value purchases.
Key findings
The Yapily report was commissioned to investigate what merchants and shoppers view as the most important factors when offering or choosing a new payment method.
In addition to chargeback concerns, the merchant data shows cost and security are deal-breakers. Almost all of those surveyed (98%) cited low fees as being an important factor when choosing a new payment method, followed closely by how secure it is.
This correlates with 40% saying they’d be open to offering open banking, which comes with low fees and high security as standard – further highlighting their dissatisfaction with the current selection of payment methods on offer, like debit and credit cards.
Questioning consumers on what they care about, the survey reveals that for low-cost purchases under £20 from trusted brands, 49% of shoppers prioritise ease of use ahead of security or protection. By the £100 mark, though, security jumps ahead, cited as the top concern for 44% of shoppers when buying from known brands, and 51% when buying from unfamiliar ones.
More than half (58%) say a lower risk of fraud would encourage them to try a new payment method, yet cards continue to be the preferred payment method despite open banking’s significantly lower fraud rate.
Making payments better: a blueprint for change
Building on these results, Yapily is now calling for change through a series of recommendations for the open banking ecosystem aimed at driving open banking adoption. This forms part of its wider mission to create a fairer financial system through open banking.
Recommendations include:
- Gaining alignment across the ecosystem on open banking’s core value propositions
- Creating a bespoke consumer protection model without chargebacks that maintains open banking’s core value propositions for merchants while giving consumers the protection they want and need
- Developing a strong, recognisable open banking brand focused on educating consumers about the core benefits when compared to other payment methods
- Introducing an open banking trustmark to help shoppers identify it as a secure, protected payment option
Stefano Vaccino, founder and CEO of Yapily, said: “Open banking has the potential to enrich people’s payment experiences beyond other payment methods. We’ve seen steady adoption so far, but the real challenge is achieving faster growth so that open banking delivers on its full potential. This report shows what needs to be done at an industry-wide level, and we’ve proposed a clear path to achieving that. We’re inviting everyone in the open banking and payments ecosystem to work together and develop a model that’s widely used, builds trust, and makes payments safer and better for everyone.”
Nicole Green, VP Product strategy, Innovation and Policy at Yapily, said: “Businesses are telling us they need lower costs and better security – which is what open banking offers. Now the challenge is finding the tipping point that drives behavioural change among consumers, encouraging them to make the switch at the checkout. Rolling out new features like cVRP faster and creating a clear, trusted brand complete with an industry trustmark for open banking payments will encourage adoption.
“But first agreeing on a consumer protection model that works for both consumers and merchants is a priority for open banking. Rather than copying old, flawed models – such as chargebacks – we need to find a model that helps merchants to thrive and consumers to trust this new payment option.”
You can read Yapily’s full Unlocking the open banking opportunity report here.