Two fintechs show how open banking can eat into cards' digital payment hegemony - eMarketer

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The news: Two fintechs integrated open banking into their platforms to streamline the payment process.

UK-based cryptocurrency firm Mercuryo partnered with payment gateway Volt to enable open banking payments for Mercuryo’s wallet.

• Two million customers use Mercuryo’s app to buy, sell, store, and pay with cryptos. Customers can purchase cryptos with Mastercard and Visa cards, Apple Pay, and Google Pay—and now, they can make account-to-account (A2A) payments through Volt’s open banking integration.
• The open banking solution lets Mercuryo users avoid hassles involved with purchasing cryptos with cards: Many issuers don’t let cardholders purchase cryptos, and those that do often impose fees. Using cards may also require additional steps for crypto purchases now that Strong Customer Authentication (SCA) rules are coming into play across Europe.
• Those hurdles mean A2A payments may be the better option for Mercuryo customers—they’re simpler transactions that still maintain security standards.

Education payments firm PayMyTuition launched open banking-powered eBill and eStatement solutions.

• The Canada-based firm’s end-to-end support for the tuition payment process includes solutions like digital bill presentment, student payment plans, multicurrency payment acceptance, and refunds.
• PayMyTuition’s new offerings let educational institutions send students electronic bills with request to pay, which triggers automatic email and SMS alerts. Students can then schedule or instantly initiate open banking-powered A2A payments. The solution also updates in real time so that students have the most up-to-date bill information.
• The solutions can eliminate the need for paper-based bills, which are slower and more expensive to process—especially for universities with large international student populations. The open banking integration also minimizes the risk of missed payments for educational institutions and reduces payment friction for students.

Why it matters: Open banking is helping make A2A payments more attractive for both businesses and consumers—threatening cards’ long-standing power in the digital payments space. The value of payments facilitated by open banking is expected to grow from just under $4 billion in 2021 to $116 billion by 2026, per Juniper Research.

• A2A payments let businesses avoid expensive interchange fees, which are set by card networks like Visa and Mastercard. But these transactions can be more tedious for consumers because they often involve manually inputting bank details.
• Open banking eliminates many of the steps required for A2A payments—customers often just need to log into their bank portal and authenticate the payment, which can be an even faster process than card payments.

Open banking’s potential threat to card payments may be why Visa and Mastercard have both acquired open banking startups. These acquisitions may help the card networks maintain their edge in the digital payments space if solutions like Mercuryo’s and PayMyTution’s catch on.

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Two fintechs show how open banking can eat into cards' digital payment hegemony - eMarketer
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