OPEN banking will become the dominant form of payment in car retailing by the end of the decade, with dealers set to benefit from the halving of their transaction costs and reducing their exposure to fraudulent card transactions, according to Bumper, the specialist automotive fintech.
Open banking enables customers to pay directly from their personal bank accounts to a dealer’s account, using their banking app rather than relying on debit or credit cards provided by a third-party.
Despite open banking being relatively new it is experiencing exponential growth in the UK with 4.5 million regular users across all retail sectors and 1 million new users added every six months, according to the Open Banking Implementation Entity, the standards body set up by the country’s largest banks.*
“Customer transactions are already being transformed by open banking across other retail sectors. Because of the high invoice values associated with automotive, we anticipate it becoming the dominant form of payment in dealerships by the end of the decade,” said James Jackson, CEO and co-founder of Bumper.
“Car buyers using open banking can make their payments online in a matter of seconds using just their bank account credentials. Also, because these payments require bank authentication within a customer’s banking app, it makes fraud significantly harder, giving a greater layer of protection to dealers.
“While dealers offering open banking can expect to see their transaction costs halve by the removal of hefty fees associated with card payments. Other benefits include more secure digital payments, minimising dealers’ exposure to fraud, and full GDPR compliance,” he said.
Bumper expects dealers to increasingly offer the option for customers paying deposits and balances on car purchases, aftersales bills and add-ons such as GAP and extended warranties.
“Open banking offers a solution that better meets the changing needs of customers looking for more convenient and smarter digital alternatives to cards,” said Jackson.
From this month Bumper will provide dealers with an open banking facility which is fully integrated with REALtime Communications.
“The addition of open banking further expands our suite of digital payment options, sitting alongside Pay Now and Pay Later, enabling dealers to offer customers the payment option that works best for their personal finances,” said Jackson.