the (r)evolution of payment by bank transfer

Payment initiation is already ready to be rolled out across Spain. Payment by bank transfer has been digitized and finally adapted to the needs of businesses and consumers to pay online.

First, let’s briefly explain what a payment initiation is: Put simply, it is Digitization of payment by bank transfer. It is a regulated service that allows consumers, whether individuals or businesses, to be redirected to their bank’s interface or portal to authorize a payment by bank transfer in real time, securely and easily. In other words, by initiating payments, payment by bank transfer is digitized and this means of payment is equipped with a electronic traceability to adapt it to the needs of companies and consumers in digital payment transactions on the Internet. Initiating payments at the physical POS requires its own chapter and will have to wait for banks to implement mechanisms for authorizing a transfer that are faster and more convenient than the current ones.

The purpose of payment initiation:

There is a fairly broad consensus in the payments industry, both nationally and at European level, that the market share of bank transfer payments in e-commerce will grow significantly in the short term due to the fact that the European institutions have decided to adopt this payment method . The payments industry has been equipped with the necessary tools for Europe to achieve digital payment sovereignty and promote bank-to-bank or account-to-account payments via the secure interbank infrastructure. This is reflected in the European Payment Services Directive (PSD2)One of its main goals is to promote innovation and competitiveness in payments by regulating the payment initiation service for the first time. On the other hand, on October 26, 2022, the European Commission published a proposal for a new regulation that also regulates the provision of instant transfers, with the main objective of promoting their availability and use.

Current status of payment initiation in Europe with PSD2:

The implementation of payment initiation at European level is still lacking some big hurdles. There are more than 4,000 financial institutions in Europe and different interpretations of the technical standards, both by the banking industry and by the competent national authorities responsible for transposing the directive into national law. This circumstance has meant that payment triggering in most European countries is not fully prepared for mass adoption. In summary, one of the main problems that exists in most banks in Europe is to be highlighted: the bank interface for initiating payments, to which the user is redirected to authorize the transfer, It is not possible for the user to select the IBAN from which he wants to pay. This circumstance forces the user to enter their IBAN manually before making the payment. Due to the poor user experience and the resulting low conversion, most of the Payment Initiation Service Providers (PISPs) in Europe were forced to conduct an Account Information Services (AIS) session prior to the Payment Initiation Service (PIS) session to collect the user’s IBANs. As part of the AIS session, the user will be asked for an explicit authorization to access their bank account and read movements, balances and accounts (at any time and for 180 days), with the aim of collecting the available IBANs from which to make the payment can be initiated. Obviously combining an AIS session with a PIS session significantly affects the conversion and user experience, not only because of the user You have to go through two SCA or strengthened authentication processes with your bank, but mainly due to the nature of the permissions that are requested by the user through the AIS session.

Much remains to be done to make payment initiation a unified service across the EU and provide an optimal user experience for massive merchant and consumer adoption. The institutions have taken note of this and as a further sign of the EU’s willingness to promote account-to-account payments, on 28 June 2023 the European Commission published a legislative proposal consisting of a Regulation (PSR) and a new directive (PSD3) which aims to overhaul the current PSD2; especially in relation to Open Banking; i.e. the payment initiation services (PIS) and account information services (AIS). As the political leaders of the initiative have mentioned on several occasions, the PSR/PSD3 aims not just at revolution, but at being one Development to consolidate the modernization of payment services in the EU that started with PSD2. However, depending on the duration of the negotiation process of the texts, it will probably take at least another three years before the PSR and PSD3 come into effect.

Spain: one of the few exceptions in Europe

In Spain we are lucky. Thanks to the monitoring, participation and interpretation of the regulations in favor of the interests of companies and consumers by the Bank of Spain and above all thanks to the long and close collaboration with each of the banks operating on the national territory together with the Bank of Spain Priceless support from Redsys and RSI , Payment triggering has been refined. In Spain, fortunately, it is not necessary to request an AIS session from the user, since the banks offer the possibility in their payment initiation interface to select the IBAN from which to pay. Therefore, It is sufficient to apply only one PIS session and consequently a single SCA, such as that applied to bank cards. In addition, it is possible for banks to provide real-time, reliable confirmation of the correct execution of the transfer, together with the information of the holder and the IBAN of the user/payer (necessary data to be able to issue payment refunds). And perhaps most importantly, the operations have been made irreversible so that, as stated in PSD2, they “(…) provide an incentive for the beneficiary to deliver the good or service without undue delay from the moment when this happens.” the payment order is issued.

Payment initiation is now available to merchants and consumers:

Gone are the low conversion rates of around 30% achieved when triggering payments in the days before regulation, when scraping techniques were used on the e-banking portal and users submitted their online banking passwords to the PISP had to pass it on themselves. Now the user interacts directly with their bank to authorize the transfer and only gives their online banking passwords to their bank to receive them Conversion rates in B2C retail are around 65% and growing. In the B2B environment, this form of payment is undeniable and has unprecedented rates close to 100%. And that’s it, surely we’re ahead the most convenient payment system for high-quality tickets.

In summary, payment initiation is ready Replace the traditional bank transferand thus positions itself on the same level of convenience as the payment methods developed for online payment. It solves an old and well-known problem with bank transfer payments, such as B. lack of immediacy, ease of use and reconciliation of collections, thus ensuring a reduction in time, processes, administration costs and most importantly savings in processing payments at very competitive rates, the result of disintermediation through account-to-account payments .

INESPAY PSD2 Bank Transfer is leading the way:

Good evidence that payment triggering in Spain is ready to be implemented at scale is that companies like Decathlon, PcComponentes or Carrefour Viajes offer PSD2 bank transfers, INESPAY’s payment initiation service, for almost two years. INESPAY payment initiation services all types of industries that need to transfer funds from account to account. Today, INESPAY is the preeminent leader in payment initiation in Spain, processes more than 70 million euros per month. With the current monthly growth of around 15%, in 2023 there will certainly be well over 1,000 million processed data.

The service’s value proposition is quite simple: by triggering INESPAY payments individuals and companies can pay by bank transfer at virtually all financial institutions Spain and Portugal easy and secure, with instant confirmation. Provision is made electronically in real time Payment information to automatically match fees. The service can be implemented as a payment button at each checkout and also as a payment link for distribution via alternative channels such as invoices, email, etc. It also offers periodic or recurring transfers, a very interesting service as an alternative to direct debit. INESPAY has a simple API for direct integration and is available by installing a simple module or plugin on shop platforms such as Prestashop or WooCommerce. It is already offered as an alternative payment method by PSPs such as Sipay, PaynoPain, Uelz, tefPay or FintechPayments. In addition, there are various technology partners specializing in different industries who promote and integrate the service with their customers. You can expand the information below

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