Card payments come at a cost to both merchants and consumers
Legacy debit card operators Visa and Mastercard traditionally offer merchants convenience by enabling them to accept card payments as an alternative to cash. However, it’s not without its drawbacks: merchants are subject to processing costs between 1-4%, and merchants and service providers with whom a customer’s bank details are shared must comply with PCI security controls around cardholder data and fraud monitoring; an additional significant overhead. The problem for merchants doesn’t stop at cost: a lack of speed creates a lag in fund settlement for merchants, which can occur 2-10 days after the transaction date.
The user experience can be improved for customers too. Customers must enter a 16 digit card number alongside their personal information at checkout, followed by undertaking a disjointed 2-factor authentication via a bank app or SMS message. Not only is this highly inconvenient, but, despite increasing security protocols, customers remain vulnerable to data breaches and fraudulent activity.
Regulatory drivers will shape the way we move and use money
Introduced in January 2018, Open Banking regulation is an initiative by the Competition and Markets Authority to improve competition in financial services and drive better value and optionality for customers by ‘opening up’ banking data. The regulation forces the UK’s nine largest banks to release customers’ data with their permission in a secure and standardised form to facilitate data shared between authorised parties online. As a result, third parties will be able to leverage such data to provide better services for a customer, such as viewing finances, taking out loans and purchasing goods online.
Banked – the global account-to-account payments network
Enter Banked, who are building the payments infrastructure that changes the game for merchants and customers alike:
- Banked integrates with merchants to offer ‘Pay by Banked’ at checkout. Merchants can accept real-time payments at checkout securely, since a customer’s bank details are never shared, and at much lower processing costs of 0.1%-1%. It does this via an API or payment link, leveraging open banking to enable account-to-account payments.
- Consumers in return are provided with a faster and seamless payment journey, removing the need to enter card details and instead transacting with 2-click authorisation and biometric verification in the individual’s banking app.
In short, Banked’s product rivals those of legacy incumbents, providing a faster and more secure product at a fraction of the cost.
Beyond Visa and Mastercard, whilst there are a number of payment technology companies innovating in this space, it is Banked’s combination of best-in-class technology and its winning distribution strategy that we believe creates a recipe for success. The start-up partners with global financial institutions such as financial services and payment companies with access to high volumes of merchants to ensure distribution at both pace and scale, like Primer, checkout.com and most recently, Bank of America.
The Pay-by-Bank market is estimated to be worth £1.1bn in fees in Europe alone, a significant and growing market opportunity for the taking. At this early stage in open-banking payment adoption, the company has demonstrable traction having processed £5m payment volumes to date. It has 300m customer account connections and +800 banks integrated and is projected to be EBIT positive by June 2024. Its other success metrics speak for itself: the company has an average processing time of 25 seconds and average fund settlement time of 88 seconds, with Pay by Bank reducing likelihood of fraud by 96%.
Saving the best for last: the team. Banked is led by an extremely experienced, determined and dynamic duo, with Brad Goodall as CEO and Neil Ambler as COO. This is not their first gig together; they were previously part of the founding group of 10x Banking, a core banking software provider powering Virgin Money’s new digital bank. Complementing the founding team, the business has strong talent in key areas such as compliance and regulation and digital security.
We are absolutely thrilled to be joining Banked on its journey to build the global payment rails of the future, and an ultimate vision to make 16-digit plastic cards a payment means of the past.