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Everything you need to know about account-to-account payments. – ShoppingOS

Everything you need to know about account-to-account payments.

Open Banking is creating a new world.
Open banking payments which is popularly know as account-to-account (A2A) payment is a major source of innovation that is currently reshaping not just the banking industry, but also several other industries that are connected to financial services such as e-commerce, gaming, travel and hospitality etc. As a very broad financial tool with several use cases, it grants third-party providers access upon users consent to their banking data through the use of secure and regulated application programming interfaces (APIs).

Banks are effectively putting in place the infrastructure for their customers’ data to be shared more easily with third parties. When the customer chooses to do so, let’s explore what this means for payments.

What are Open Banking payments?
Open Banking makes it possible for platforms like ShoppingOS to facilitate payments directly from a bank account to another bank account in a faster, safer, and cheaper way. The bank authenticates purchases without involving other third-party organizations like Visa, Mastercard, Amex PayPal, Apple pay, Worldpay or Stripe. UK’s Open Banking Implementation Entity (OBIE) recently issued a statement citing a substantial adoption of open banking payment and other use cases across 3.9 million consumers and 600,000 small businesses, significantly minimizing the risk of fraud and customer error when making payments as well as significantly reducing card payment processing costs.

Cards payments and e-wallets come with expensive fees and high failure rates. Ilia Dragan, the Chief Product Officer at ShoppingOS claimed that implementing open banking payments can save a merchant up to 85% in processing fees and other incidental costs. These variable costs, lack of control over the customer journey, slow processes and a lack of flexibility are all issues that come with traditional payments methods. And because these methods weren’t built for the age of ecommerce, they can cause huge hurdles for merchants looking to offer the slick, quick, convenient payments experience those customers expect.

“The Ageing card infrastructure is not a good fit for today’s e-commerce merchants, they were designed 40 years ago”

Victor Colta, Co-founder at ShoppingOS.

Cards & e-wallets are costing ecommerce merchants more than they realize.
In today’s world, digital payments are still dominated by card networks and e-wallets, we see this at every checkout on many webstores. These payment systems are complicated and very expensive for merchants and customers. For example, when you buy your cousin a pair of shoes on Boohoo, the retailer contacts an “acquirer”, such as WorldPay or Global Payments, which gets in touch with Visa or MasterCard to take the payment from your card-account by interfacing with your bank, these bureaucracies take over 2-7 working days before the merchant (Boohoo) funds is settled in their bank account. Also, each of these intermediaries charges transaction fees, generally costing businesses anywhere from 2% to 4% depending on the payment provider. This is a significant chunk of fees that are paid on each transaction. This in turn shrinks profit margins and, in some cases, businesses must push the transaction fee onto the consumer.

Let’s investigate the cost implication on ecommerce merchants in more detail.
The third parties involved in the earlier illustration charge their own fees on every transaction. While these fees vary by the provider and card type, here’s a rough breakdown of what to expect for each transaction:

❌ Merchant Service Charge (MSC); anywhere from 0.25%–3% depending on card type and card issuer.

❌ Interchange fees; 0.2% for debit cards and 0.3% for credit cards.

❌ Card-not-present transaction; varies but will be more expensive than other transactions.

❌ Minimum Monthly Service Charge (MMSC); £5–£25 per month (when a minimum threshold isn’t met).

❌ Online payment gateway fees; varies, but typically £20–£75 per month for hosted checkout pages.

❌ Authorisation fees: 1–3p per transaction.

❌ PCI compliance fee: £2.50–£5 per month.

❌ Chargeback fee: £10–£20 per customer chargeback.

❌ Setup fee: up to £150 at the start of any contract.

❌ Cancellation fee: typically, £115 for early cancellation.

On average, you could expect to pay anywhere from 2% to 4% of each transaction’s value in overall fees. Please note that these are rough estimates. Charges vary widely according to card type, payment type, industry, and the volume of transactions you process.

ShoppingOS has, however, developed a better alternative that allows payments to be made directly from one bank to another bank, without any middleman, as well as reducing payment processing fees by 80%. ShoppingOS payment infrastructure also reduces the likelihood of fraud and provides a smoother customer experience by leveraging on Open Banking technology which exists to spark competition and innovation in the payment industry.

ShoppingOS provides a better way to accept ecommerce payments.
ShoppingOS (Pay with Bank) can address many of the challenges associated with traditional payment methods because our technology bypasses the card payment rails and doesn’t rely on outdated infrastructure. Merchants can retain complete control of the checkout experience, benefit from a simpler cost structure and enable faster refunds, among other advantages. In short, ShoppingOS can help ecommerce merchants take back control of their payment operations that are outsourced to intermediaries like Mastercard, Visa, PayPal, Stripe, Worldpay. We know running an e-commerce business isn’t easy, most business owners juggle multiple platforms to accept payments and to manage customer experience. ShoppingOS has created a better payment solution for e-commerce merchants. So, you must have been asking how ShoppingOS solves all these problems, let’s break it down:

Eliminate credit and debit card charges entirely
There’s only one way to eliminate costly card processing fees altogether: steer your ecommerce customers away from card payments to more cost-efficient alternative payment methods. Pay with Bank, powered by ShoppingOS, is one option for businesses looking to reduce their reliance on card payments. The average fee for payments powered by ShoppingOS is less than 1% of the transaction value, and that is the only charge applied to the transaction.

✅ Eliminate chargebacks
With ShoppingOS, businesses eliminate chargebacks and interchange fees entirely. Chargebacks were designed to add protection for debit and credit card users, allowing them to easily get their money back if something was never delivered, if they weren’t refunded promptly, or unexpected charges were added to the transaction. According to the feedback we received from some merchants, there are a lot of instances where chargebacks weren’t made in good faith, where a customer has no legitimate reason for a chargeback but requests one anyway. This is often known as friendly fraud.

Typically, the bank/card issuer will side with the customer then the merchant must pay the original transaction cost as a refund, in addition to a chargeback fee typically ranging from £10 to £20. To put those fees into perspective, MasterCard said there were 615 million chargebacks requested in 2021. Chargebacks have become such a problem for businesses, payment processors have begun offering chargeback protection and insurance.

However, when a customer makes payment via Pay with Bank powered by ShoppingOS, they give instructions to their bank (e.g., send money to X sort code, Y account number), which their bank is obliged to act on. Once the bank has correctly executed the instruction, they have no further involvement, or liability, for the transaction. However, if the bank makes a mistake, the consumer is eligible for a refund.

✅ Delight customers with fast refunds
Based on our conversations with ecommerce merchants or business owners, we learnt that most of the customer service calls that merchants received are refund-related – because the customer is chasing a delayed refund. Unfortunately, slow refunds are a painful (and clearly expensive) issue with card payments and manual bank transfers because the processes behind them are slow coupled with the fact that merchants don’t receive instant settlement, so it becomes very difficult to process refunds quicker. However, with ShoppingOS payments are instant and refunds can be issued to customers in real time.

✅ Eliminate card fraud
The annual cost of dealing with fraud is now at €25 billion (there is a comparable number in this report), and that’s before considering other issues related to the friction of using cards for payments, such as shopping cart abandonment (users give up instead of pulling out cards and punching numbers in), mistyped details and more.

Pay with bank powered by ShoppingOS doesn’t just reduce card fraud, they eliminate it. You don’t need a card to complete an Open Banking payment. Which means there are no fraudulent transactions by scammers using other people’s card details. As SCA is built into the Open Banking payments flow, scammers are less likely to make fraudulent transactions. Consumers use their face, fingerprint, or other secure method to log in to their banking application on their own device to approve transactions. This makes it much harder for fraudsters since Bank authentication is also baked into the payment experience, reducing the likelihood of fraud. Ecommerce businesses using ShoppingOS, will therefore benefit from a reduced rate of fraud and a safer, smoother payment journey for customers.

✅ Reduce cart abandonment
ShoppingOS payments are far less complicated than finding or remembering a long card number, expiry date, security code and billing address. Let alone if you are forced to sign up during this process. Considering that 87% of consumers will abandon their shopping if they feel a checkout process is “complicated”, getting the checkout process up to scratch will only help ecommerce businesses convert their visitors into customers. ShoppingOS payment flow is as simple as choosing your bank, approving the payment via your mobile app or online banking without the need for additional online forms, card details. Consumers log into their banking app or online platform using facial recognition, fingerprint, or other secure login method to approve transactions. This reduces the number of steps involved in the payment process when compared to card payment processes and reduces the chance of human error when entering payment details.

✅ Ownership of refunds
E-commerce merchants feel held back in delivering the ideal customer experience they want, because with traditional payment methods – cards in particular – the power isn’t in their hands to do so, they must contact either payment processor, payment service provider or acquirer. With ShoppingOS, there is no need to wrestle with the bank or card infrastructure providers to unlock funds for refunding consumers. With Open Banking reverse payments, businesses control the refund process from start to finish. One benefit of cutting out the middleman in payments and refunds is that the business and consumer can pay each other directly without any unnecessary delay. A refund that involves card/payment providers usually takes up to five working days, with ShoppingOS it is instant. Interested in partnering?

ShoppingOS is a no-code Open Banking payment platform for e-commerce merchants – signup as a merchant today.

If you’re looking to improve your payment stack and would like to understand how ShoppingOS can help, 🗣 contact us to book a demo.

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