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they've typically been hesitant to do because of privacy This could bode well for retailers. "If a company uses Open
and security concerns," McIntyre said. Banking APIs to process payments instead of cards it could
save a lot of money," Gavin Scruby, CIO of SmartDebit, a
Hometh added, "There has to be increased security over leading UK provider of bill-pay services, wrote in a recent
what exists today. It has to be really locked down." blog post. Ranta agreed it is possible, stating, "It's not near
term. However, there will be a point in time when it will
Ann Cairns, Vice Chairman of Mastercard, delved into be."
this in a recent blog post. "It is vital that the most robust
safety and security technology is deployed in enabling A 2017 Accenture survey of payments executives at large
the development of the new ecosystem of open banking European retailers found nearly one third expected to
interactions between banks and third parties," she wrote. be using APIs to interface directly with bank systems
"The imperative for all those that operate in this space to access consumer bank accounts once Open Banking
is ensuring that, as technology evolves and behaviors and PSD2 took effect. Other ways they plan to use APIs
change, the way we pay is frictionless, convenient and include accessing financial information to tailor products
secure." and generating POS offers and discounts.

Regulators are keen to ensure the move to open banking "Open banking is an opportunity for retailers to provide
incorporates protections, particularly for consumers. PSD2 a better customer experience through flexible payment
and the U.K.'s open banking rules both include consumer initiation and faster refunds, and to increase cash flow
protection provisions, along with customer authentication by bypassing card networks and fees, and reducing fraud
and data and transaction security requirements. PSD2 and chargebacks," Jeremy Light, Vice President of EU
also includes a ban on merchant surcharging of consumer Strategic Accounts and former Director at Accenture said
credit and debit card purchases. The surcharging ban also in discussing the findings
applies to business-to-business direct debits and credit
transfers, but not to B2B credit and debit card payments. However, a survey of Tier 1 and Tier 2 retailers in the U.K.,
published by Consult Hyperion in January 2018, found
The U.S. Consumer Financial Protection Bureau published fewer than one in two (48 percent) were even aware of the
a set of principles for protecting consumers who authorize PSD2; just 16 percent were hoping to "take advantage" of
nonbanks to access their bank accounts for payments the new regulations.
and other banking transactions. In a statement issued in
2017, the CFPB said that "while consumer-authorized data US will be a laggard
sharing promises great benefits to consumers, there are As the Barclays-PayPal deal and Mastercard's ownership
many consumer protection challenges to be considered as of Vocalink illustrate, the move to open banking in Europe
these technologies continue to develop." will impact the U.S. marketplace. "Huge global banks like
BofA [Bank of America] and Barclays are not going to
The published principles drive home this point. They do want to have separate systems for the U.S.," Hometh said.
not promulgate binding rules, but rather set a "vision" for
protecting consumers and other stakeholders, the bureau But the lack of regulatory edicts and the sheer size of the
said. The principles touch on data access, data scope and U.S. market – with over 10,000 banks – points to a long
usability, control of data and informed consent, payment adoption curve. The experiences of Zelle, a bank-controlled
authorizations, data accuracy and security, and dispute mobile payment app launched last year to compete with
resolutions related to unauthorized account access. PayPal's Venmo, validate this. One year on, only about 100

Merchant, consumer demand mixed banks have signed on to participate, according to Early
Warning Services LLC, the banking consortium that owns
Consumer demand for new banking propositions exists, and operates Zelle. In the first quarter of 2018, Zelle carried
as evidenced by ongoing adoption of mobile options for 85 million transactions worth over $25 billion.
banking and payments. A 2017 survey of U.K. consumers
by the international consultancy Deloitte found 58 percent Mobile payment options like Zelle could catch merchants'
of those with mobile banking apps could be persuaded fancy, particularly those looking to steer customers to
to switch to a mobile-only bank for the ability to perform low-cost payment options. But what they appear most
more banking transactions on their mobile devices. That interested in, Ranta suggested, are omnichannel solutions.
survey also found consumer openness to accessing bank "Merchants want unified connections. They don't want
accounts via third-party interfaces. Forty-nine percent of separate apps for ecommerce, mobile payments and brick-
U.K. consumers said they would trust doing this through and-mortar," he said.
a digital payment company; 43 percent said they would
trust accessing their bank accounts through a retailer. Patti Murphy is Senior Editor of The Green Sheet. Follow her on Twitter
at GS_PayMaven or email her at patti@greensheet.com.

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