Published : 9 months ago, on 15/03/2024

The Transformative Power of Open Banking for E-commerce: an interview with Anastasija Tenca, Chief Operations Officer at Noda

• What is the key benefit of open banking for e-commerce businesses? 

Anastasija Tenca

The key benefit is that it enhances the customer experience while reducing financial risks for merchants. By adopting open banking, retailers can gain deep insights into their customers’ spending habits. This can help them tailor their services for a more personalised touch. 

Open banking also offers a range of flexible payment options, streamlining purchases for customers and encouraging repeat business. For example, open banking facilitates efficient direct bank-to-bank transfers. This means quicker processing, lower transaction costs, and ultimately, satisfied customers who appreciate the efficiency,

• What are the key open banking tools e-commerce companies can use?

There are a variety of great open banking tools that can help e-commerce businesses. For example, the above-mentioned bank-to-bank payments, also called account-to-account (A2A), allow customers to make direct transfers from their bank account to the merchant’s account without the need to manually type their payment details. E-commerce companies can use A2A as one of their payment methods to offer flexibility and efficiency to their clients. 

Payment Initiation Services (PIS) can enable e-commerce merchants to initiate payments on behalf of the customer with their consent. This can streamline the checkout process and reduce cart abandonment rates. Open banking can also automate the refund process and enhance loyalty programs by directly crediting customers’ bank accounts. 

Data aggregation is also a big part of open banking. With Account Information Services (AIS), e-commerce companies can access financial data provided by customers. They can further enrich the data, gain insights, and personalise experiences. Open banking data can also be used for identity verification in know-your-customer (KYC) processes and multi-banking solutions. 

At  Noda, we’re at the forefront of this open banking revolution, empowering e-commerce businesses to provide a superior shopping experience. With innovative features like Noda Touch, Noda Share, and Noda Go, we’re improving online payments. 

• What are the main challenges e-commerce businesses face without open banking integration? How can open banking solve these problems? 

Without open banking payments, the checkout process may be lengthy or complicated. This unpleasant user experience can lead to cart abandonment and less revenue for companies.

Apart from this, e-commerce businesses may struggle with high transaction fees, fraud and chargeback risks, inefficient reconciliation, and limited customer insights. 

For example, traditional payment methods like credit cards often come with a significant processing costs and hurt margins. A2A payments facilitated by open banking typically have lower transaction fees compared to traditional payment methods. 

Meanwhile, manual reconciliation of payment can be time-consuming and error-prone.  Payments via open banking can be automatically matched with orders, streamlining the reconciliation process. 

Customer insights would also be a big loss for e-commerce businesses that don’t leverage open banking. Without access to data, businesses would not know customers’ preferences and spending habits.

• In what ways do you foresee open banking influencing global e-commerce trends in the next few years? 

Mainly through enabling a variety of payment solutions, such as A2A payments, which are likely to become more prevalent in e-commerce in future. The development of innovative payment services that offer convenience and lower fees could shift consumer and merchant preferences away from traditional payment methods. 

• What factors would the adoption of open banking in e-commerce depend on? 

Firstly, the regulatory support. The extent to which global markets adopt and implement open banking regulations will play a crucial role. Jurisdictions with supportive regulatory frameworks, like the EU with PSD2 and the upcoming PSD3, have already seen rapid advancements in open banking services. Similar regulatory backing in other regions could accelerate its influence on e-commerce globally. 

Secondly, the technological integration is also an important factor. The ease with which e-commerce platforms can integrate open banking APIs into their existing systems will affect its adoption rate. Platforms like Noda, which offer seamless integration solutions, are crucial for this transition. Noda’s technology allows merchants to tap into the benefits of open banking.

• What are the biggest misconceptions or doubts about open banking in the e-commerce sector, and how can you clarify these? 

One of the biggest misconceptions is that open banking compromises customer privacy and security. Many believe that sharing financial data with third-party providers (TPPs) increases the risk of data breaches and fraud. 

However, open banking operates under strict regulatory frameworks, such as the PSD2 in the EU. They mandate rigorous security measures, including strong customer authentication (SCA) and secure APIs. These protocols ensure that customer data is shared securely, with consent being paramount. 

Another doubt is the perceived complexity and cost of integrating open banking solutions. Some e-commerce merchants worry that adopting open banking will require significant investment and technical overhaul. In reality, open banking is designed to be accessible and cost-effective. 

There’s also a misconception that open banking is only beneficial for large businesses. In truth, small and medium-sized enterprises (SMEs) stand to gain significantly from OB payments and data. It levels the playing field by providing tools previously available only to larger corporations. This can help SMEs compete more effectively.

Lastly, some merchants and consumers believe that open banking is still a distant future rather than a current reality. Open banking is already transforming the financial landscape in many ways. As awareness grows and technology continues to evolve, open banking will become increasingly integral to e-commerce platforms. Plugins are one of the ways how this can be achieved. For example, Noda already offers a plugin for the OpenCart platform.