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UK fintech TrueLayer launches its payments API to rival cards – FinTech Futures


TrueLayer, a UK-based open banking provider, has launched its payments application programme interface (API) to rival cards.

Called PayDirect, the new product “combines one-click verification with instant deposits and withdrawals”.

The bank-to-bank initiated transactions covered by the new API include online payments, account funding, withdrawals and refunds. TrueLayer customers include Revolut, Trading 212, and Zopa.

PayDirect claims just a 3.5% payment failure rate

The open banking provider, which counts Tencent, Temasek, and Santander’s Mouro Capital as backers, says payment failures tend to be four times lower with PayDirect than cards.

On average, cards fail up to 15% of the time. But with PayDirect, the fintech claims just a 3.5% failure rate. In turn, this allows companies to cut down on failed payments which can spur unnecessary customer churn.

The API also verifies account ownership directly with the bank, removing the need for another third-party solution. TrueLayer claims this will make bank onboarding three times faster.

Gearing up for SCA

Card issuers must implement Strong Customer Authentication (SCA) by the UK’s extended deadline of 14 September 2021.

SCA will apply each time a user tries to make a payment through a remote channel online. In other words, anywhere where the risk of fraud could be present.

According to the European Central Bank, some 79% of all card fraud took place online via Card Not Present (CNP) transactions in 2018. Which is why the regulation – though messy when multiple payees are involved – is coming into effect.

Every time a customer pays for something online using their card, they have to go through two-factor authentication. For example, they will have to enter a one-time passcode alongside payment card details.

The regulation, set to carry huge friction for cards, is anticipated by many to be a real watershed moment for open banking-powered payments, which carry no such friction.

Leon Muis, Yolt Technology Services’ (YTS) chief business officer, told FinTech Futures in November that SCA will “level the playing field” for payment initiation services providers (PISPs).

Marie Steinthaler, TrueLayer’s vice president for global data products, agrees. She told FinTech Futures that SCA “impacts cards heavily”, unlike PISPs.

The regulation is already seeing merchants migrate to alternative payment methods. Be that offering deferred payments, which avoids pay at checkout, buy now, pay later options, and bank transfers.

Breaking up the card monopoly

Last year saw card issuer giants Visa and Mastercard try to buy their way into the open banking space.

Whilst Visa’s $5.3 billion bid for Plaid fell through earlier this month after the US Department of Justice (DOJ) lawsuit, Mastercard got its acquisition of Finicity over the line.

With their revenues heavily relying on merchant fees and card-based payments, Visa and Mastercard have recognised the need to adapt to new technologies.

“The steps the industry has taken to develop open banking and open APIs have had real impact in the M&A [merger and acquisitions] landscape,” Chermaine Hu, chief financial officer (CFO) at Episode Six, told FinTech Futures in December.

“They have allowed for smoother transitions and unified systems and are starting to drastically reduce the challenges associated with legacy technology.”

Luke Massie, VibePay’s CEO, thinks opening banking will really kick off when data and payments can be combined through the technology.

“Creating a new payments and data insights gateway for consumers and businesses alike will push the boundaries of open banking,” he told FinTech Futures last year.

It will make it easy to transact online with seamless, data-driven, account-to-account (A2A) payments. Accelerating the demand for digital payments in the future.”

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