From streamlined collections for lenders to increased financial control and tailored repayment options for borrowers, including open banking payments as part of a customer-centric collections strategy is paving the way for a more inclusive and secure lending ecosystem. But what are the practical applications of open banking in the credit collections process?

The majority of individuals in the UK currently possess more than one bank account. recently conducted an online poll and found that 93% of respondents have more than one bank account, with 39% having more than four bank accounts. We can therefore assume that an individual’s funds are distributed across multiple accounts, with no singular account holding all their assets. Consequently, the account associated with their Direct Debit (DD) or Continuous Payment Authority (CPA) set up for credit collections may not always be the account which has available funds – this is where open banking comes in.

Introducing the option to pay via open banking from a different bank account than the one linked to their CPA or DD allows borrowers to make loan repayments from an account of their choice, enabling them to manage their cash flow more effectively. This benefits both the lender and the consumer. Open banking also enables borrowers to have the flexibility to select the repayment amount within their means. This set up ensures that the lender can collect repayments effectively, while also safeguarding the consumer’s financial well-being by allowing them to pay back only what they can afford in a given month.

From a lender perspective, open banking payments have a lower failure rate compared to direct debits or card payments. Our payment transaction data found an average acceptance rate for Open Banking payments of 97% compared to 70% for standard card authorisations (Source: The Hub) . Open banking also relies on secure APIs (Application Programming Interfaces) to initiate transactions directly between banks, eliminating the potential for manual input errors or outdated payment details. The automated nature of open banking payments significantly reduces the likelihood of payment failures, the associated inconvenience, and potential fees.

The combination of lower failure rates and instant settlement offered by open banking payments ensures that borrowers can make affordable and reliable payments, reducing the risk of missed or late payments that may negatively impact their credit score. The efficiency and speed of open banking payments contributes to a smoother and more seamless borrowing experience for borrowers and lenders alike. have developed their own proprietary open banking solution, Pay by Bank. We also offer payments via card and digital wallets. Get in touch if you are interested in optimising your payments ecosystem.