TL;DR:

This week, I am diving deep into a few key areas that are shaping the future of finance: open banking, improving payment authorization rates, and the evolving payments landscape in the UK.

Open banking is revolutionizing the way financial data is shared. In the UK, we’re seeing a surge in both infrastructure providers that power these connections and customer-facing solutions that leverage this data to create innovative products and services.

For example, Xero uses open banking to streamline accounting for small businesses, while Yolt provides a one-stop shop for consumers to see all their accounts in one place. This trend is expected to continue in Europe, with new regulations like FIDA creating a framework for even broader data sharing across the financial industry.

Are you a business owner frustrated with declined payments? You’re not alone! This week, I also looked at some practical tips to improve your payment authorization rates. The most common culprit for declines is simply insufficient funds. To combat this, you can offer alternative payment methods like digital wallets or buy now, pay later options. Additionally, for subscription businesses, consider shifting your billing cycle to a time when customers are more likely to have the funds available.

The UK payments landscape is changing rapidly. While cards still dominate point-of-sale transactions, digital wallets are gaining serious traction. It is expected contactless payments through mobile wallets to more than double in the next few years. Interestingly, account-to-account (A2A) payments are lagging behind, but new regulations and the growing popularity of QR codes could see this change. Buy now, pay later (BNPL) is another area witnessing steady growth, offering consumers more flexibility when it comes to managing their finances.

With open finance on the rise, traditional banks have a big decision to make. They can simply comply with new regulations or take a proactive approach and leverage open banking to create new value propositions for their customers. By becoming data orchestrators themselves, banks can offer more personalized products and services, ensuring they stay competitive in this evolving landscape.

I also explored the key considerations for implementing a successful online marketplace. Integrating various systems seamlessly is crucial, especially when it comes to managing payments. Fortunately, there are solutions available to automate these processes and simplify the launch of your marketplace.

Big news Monzo, the UK’s biggest digital bank, finally turned a profit! They raked in £880 million this year, which is a big jump from last year. Sounds like their plan to diversify their income streams is paying off.

Speaking of expansion plans, Bunq, a European neobank, is hoping to snag a UK banking license soon. They’ve got their eyes set on British shores! On the other hand, Klarna, the buy now, pay later giant, is facing some growing pains as they expand into the US. Seems their aggressive strategy might be leading to some credit losses. But hey, that’s the risk you take, right?

Insights & Reports

Emerging open-banking propositions

Propositions fall into two main categories — infrastructure providers and customer-facing propositions, with customerfacing propositions further split into augmentations to existing products and entirely new customer experiences.

— Infrastructure providers: In the last two years, many players in the UK have started providing the engine by which other companies, such as fintechs and banks, can offer digital financial solutions without the need to build everything themselves. In the UK, almost 30 percent of open-banking license holders are infrastructure providers (the remaining 70% are customer-facing propositions). This has had a multiplying effect on market innovation since these providers make it easy for others to launch or offer new products and services more quickly. Some providers, such as Truelayer, provide data access and transfer on the back-end via APIs that power consumer-facing propositions. Others, such as the pan-European player Tink, offer a complete end-to-end solution for payments, transaction aggregation, risk analysis, and financial management.

Insight continues…

How to solve declines and increase payment authorization rates — Part 1

Dive into your transaction data and understand the reasons for your low payment authorization rate. Are your declines mostly due to cardholder issues or technical availability? Do you have a high fraud rate?

👉 How to solve for insufficient funds

Insufficient funds is the most common reason for soft declines, but it’s also one of the easiest to solve. By implementing a couple of key features into their checkout page, merchants can reverse or prevent insufficient fund declines and as a result increase the number of payment authorizations.

✅ Add alternative payment methods (APM)

Insight continues…

Curated News

Monzo Bank Announces First Full Year of Profitability

Monzo, the UK’s largest digital bank, today announced its first full year of profitability, achieving a pre-tax profit of £15.4m for the financial year ended 31 March 2024. This was driven by a 2.5x jump in gross revenues to £880m, across diversified income streams.

News Continues…

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Sam Boboev

I am a fintech enthusiast and product leader passionate about crafting simple solutions for complex problems. Subscribe https://www.fintechwrapup.com/