What is Open Banking?
Open Banking is a new quick and easy way to pay for goods or services online using your internet banking in the UK and Europe.
It was designed to bring more competition and innovation to financial services, it was set up by the Competition and Markets Authority on behalf of the UK Government. Providers of open banking services are regulated by the FCA (Financial Conduct Authority) or the European equivalent.
Why was it introduced?
Until Open Banking was introduced, most payments made on the internet were completed using credit or debit cards or services such as PayPal. Most online merchants are charged large percentages of each sale for utilising these services, in turn these fees are passed onto the customer.
Open banking solves this by letting customers pay for goods or services using their online banking. Open banking is a free service and you will not be charged by your bank, some merchants or service providers may pass this fee on to the customer.
How does it work?
Essentially, Banks give payment processors permission via API (application programming interface) to initiate payments on behalf of the customer through their internet banking.
All payments have to be approved by the customer. A PISP cannot directly debit funds from your account.
It is important to understand that you are NOT fully logging into your internet banking. You are only using your internet banking details to confirm a payment that has been pre-populated for you by the payment processor or PISP (Payment Initiation Service Provider)
What does this actually mean ?
We will use a use a scenario to explain exactly how it works for you:
You are on the Sequoir platform and want to pay for a digital currency order worth $25.
You confirm the order amount, accept final price quoted and proceed to payment.
You will then be redirected to the open banking service providers page (Token.io) and given the option to select your bank and log in using your internet banking details. Note: You will still be able to see the Sequoir buy screen in the background.
You will see that the purchase amount and Sequoir's payment details have already been completed for you.
Now, check the pre-populated order amount is correct and confirm the payment.
Payment has now been made into Sequoir's bank account. (funds normally clear within 5 minutes)
Once clear your digital currency order is sent directly to your preferred wallet address.