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Open banking is revolutionizing the way we think about money movement and management.
By unlocking banking data for third-party developers via application programming interfaces (APIs)—open banking suddenly shifted the trajectory of services, innovation and competition within the financial sector.
Within this financial revolution, new forms of payment are emerging and thriving. This is largely due to the simplicity, security, and affordability of open banking payments. And it’s a big reason they’re disrupting the multi-trillion dollar payment processing industry.
“When you peel back the layers of the legacy way to solve digital payments, it was either make it easier to accept the card online, like Stripe or Square, or you could attempt something really grand, which was to go around the system,” Aeropay Co-Founder and CEO Dan Muller recently told TechCrunch.
This post breaks down open banking payments with the details you need to understand the significance, implication, and trajectory these systems enable in an increasingly modernizing world.
Open banking refers to a financial services practice where banks and financial institutions enable third-party developers with access to consumer banking, transaction, and other financial information through the use of application programming interfaces (APIs).
Open banking systems increase competition and innovation in the financial services industry, offering tailored financial products and services to consumers and improving user experience.
Whether it's financial management, payment initiation services, or any other wide range of financial advancements, open banking enables a more transparent, cohesive financial sector.
Open banking plays an integral role in the evolution of money movement—particularly when it comes to the way consumers pay (or get paid).
Open banking payments leverage secure APIs to facilitate direct transfers of funds from a customer’s bank account to a merchant or service provider, often bypassing traditional payment intermediaries.
The process works like this:
Digital bank transfers (also known as “pay-by-bank” or A2A) are the most widely used and fastest growing open banking payment method.
Digital bank transfers allow shoppers to send payment to a merchant by linking their bank accounts, transferring the funds directly between customer and business banks.
While pay-by-bank is already used by 36% of consumers, the payment method is quickly garnering widespread acceptance and consumer demand. These open banking payment gateways are more convenient for consumers, more affordable for businesses, and safer than traditional payment methods.
Open banking payments are rising in popularity because they deliver results. These are the key benefits:
The way consumers pay hasn’t evolved much in the past couple decades—but that’s changing.
New technology like NFC payments and mobile wallets are catching on fast, but there’s a more significant payments revolution bubbling to the surface—and it’s sparked by open banking.
Pay-by-bank is a faster, more affordable, more secure, and more convenient payment method because it’s a direct transfer of funds from one bank to another. Cards can’t keep up as their transactions are processed through payment networks like Visa, MasterCard, or American Express, involving multiple intermediaries such as acquiring banks, issuing banks, and card networks.
Aeropay CTO Josh Lockhart explains the rising pay-by-bank model as an “ability to strip away the fluff from cards, lean on the strengths of banking, and facilitate a simpler money movement concept that’s actually more convenient.”
We’re entering a new era of money movement and financial inclusion. Traditional payment methods now face heavy competition from pay-by-bank solutions. As consumers and merchants further adopt open banking payments, disruption will increase exponentially.
Aeropay's platform seamlessly connects bank accounts using Aerosync, a homegrown bank aggregator that facilitates faster, more secure money movement.
Our platform enables customizable integrations via a full suite of open APIs. The commercial impact for businesses is significant, with industry-high approval rates while minimizing return and fraud risk.
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We’re happy to show you our full payments solution and put the best bank-to-bank transfers to work for your business.