Digitization has made great strides in all fields, particularly in payments. The arrival of new players like payment aggregators or initiators is disrupting the European payments ecosystem. And with the introduction of the second Payment Services Directive (PSD2), new services are appearing via Open Banking and the use of APIs.
These transformations bring real opportunities for businesses, enabling them to offer their customers a broader range of payment solutions, while responding to ever-greater needs for digitization and security.
Within this context, Natixis Payments has developed a payment initiation solution incorporating the advances permitted by PSD2 and instant payment for the benefit of Groupe BPCE companies.
Carine André, Deputy CEO Natixis Payments – Head of the Payment Processing & Solutions business unit, decrypts this new solution.
How does the solution work?
Payment initiation is a new way of triggering payment by transfer.
With traditional transfers, which are triggered on the payer’s initiative, the customer enters and validates the payment from his mobile or web banking area. This obviously requires the customer to know the beneficiary’s bank details in advance.
With payment initiation as introduced by PSD2, it is the beneficiary who triggers the transfer order; the beneficiary is then directed to the initiation API presented by the payer’s bank.
On receiving the transfer order, the payer’s bank contacts its customer to obtain the customer’s consent. After obtaining consent, the SEPA or Instant Payment-type transfer is issued in favor of the beneficiary, or in other words, the party that initiated the payment order.
Who is it aimed at and what are the advantages for the customer?
This new payment collection solution based on transfers responds to many use cases and particularly the needs of businesses, for whom the volume of payments collected by check is a sore point; checks appear to be one of the means of payment most commonly exposed to fraud.
The interviews that Natixis Payments regularly conducts with clients show that there is heavy demand for the use of payment initiation in order to optimize receivables recovery procedures.
The solution also offers the advantage of better traceability of funds: by initiating the transfer order, the business has the possibility of mentioning the references to be conveyed from end-to-end and which enable reconciliation with accounting entries once the funds are received.
*Check fraud in France accounted for 46% of the total number of frauds in 2019* (Observatoire de la Sécurité des Moyens de Paiement, 2019 annual report published on Tuesday 22 September 2020).
Open Banking was introduced in the second European Payment Services Directive (PSD2) and is based on banks’ granting access to their IT systems and sharing data on their customers with third parties. Application Programming Interfaces or APIs are central to this model.
An Application Programming Interface or API is a software intermediary that allows applications to communicate with each other for the mutual exchange of services or data.