The growth of Open Banking in the United Kingdom has continued to accelerate.
The latest data from Open Banking Limited, the independent entity established by the Competition and Markets Authority (CMA) to oversee its implementation, shows “more than 9 million active users and 14.45m payments made in January 2024 alone.”
TrueLayer claims that it “has led that growth, delivering consumers and merchants an instant way to pay and be paid by bank.”
However, it wanted to go a step further and “improve the end-to-end payment journey with a closed-loop payment product that combined instant deposits with a seamless withdrawal and refunds process.”
TrueLayer examined the market “for a technology-focused banking partner for merchant accounts and direct access to the UK’s Faster Payments System (FPS) to deliver on its vision.”
That led it to ClearBank.
Benjamin Woodcock, Payment Infrastructure Partnerships Lead, TrueLayer, said:
“Working with a bank that is at the forefront of the industry and appreciated what we did was always the goal and ClearBank met all our requirements. It’s a tech first bank, with a flexible API-based model that meant we could be nimble and not have to worry about implementation overheads. More than that, ClearBank was highly engaged with us throughout to create a genuine partnership that would benefit both firms as we continued our growth journeys.”
Existing refund processes are inefficient and error prone, “resulting in higher costs and an increased operational effort for merchants due to, for example, manually tracking and managing multiple payment reports.”
The result is customers can be left “waiting for up to five days to receive refunds.”
Woodcock explained:
“The ability to offer an instant refund or a payout is a gamechanger to the relationship between a consumer and a merchant. It offers the consumer piece of mind when making a purchasing decision, and can build trust and loyalty.”
The TrueLayer closed loop product “offers seamless refunds and payouts, with no need for manual data entry.”
It receives the user’s account details “from the inbound open banking payment and then gives businesses the ability to make a closed-loop payout, guaranteeing that the payment is directed to the account it was initiated from.”
What’s more, alongside leveraging ClearBank’s virtual account set up to collect funds for merchants, TrueLayer uses “the bank’s Confirmation of Payee capabilities to complement the payout (and refund) process, adding additional confidence in payment settlement.”
ClearBank facilitates all the underlying product “aspects of merchant accounts where the funds are held, including seamless reconciliation that removes the previously manual or semi-automated process of matching funds received to their corresponding transaction.”
Virtual merchant accounts provide TrueLayer “with a straightforward structure to manage millions of merchant accounts, each with a unique IBAN.”
Through connectivity to FPS, ClearBank then “enables TrueLayer to instantly pay out to the bank account that made the initial transaction.”
Benjamin Woodcock, Payment Infrastructure Partnerships Lead, TrueLayer, added:
“ClearBank’s instant first capabilities are critical. They know that we want to settle everything over FPS and that’s never a debate. We don’t want to say it’s ‘instant’ and then have to settle things over Bacs.”
Merchant demand for the product has “been reflected in the results – within just a few months after its launch in 2021, the solution was processing millions of pounds of transactions. It has continued to see significant year-on-year growth as more merchants have appreciated the benefits that instant refunds can deliver.”
Since January 2023, volumes are up seven times.
Benjamin Woodcock, Payment Infrastructure Partnerships Lead, TrueLayer, continued:
“The success of closed loop is testament to our collaboration and our ability to meet the payment needs of merchants across the UK. ClearBank has been a truly proactive partner in working with us to support smaller merchants, in particular. That mattered to us because these merchants are affected by legacy refund processes that take up time, money and effort that could be spent building stronger relationships with their customers. We didn’t want them missing out on the benefits of instant refunds because our banking partner wouldn’t be flexible enough and ClearBank was completely aligned with our thinking.”
Delivering a new method for sending refunds requires “a stable platform with market-leading uptime. Any issues or outages could cause significant issues for TrueLayer and its customers, particularly as it launched a new service to market.”
As Woodcock explains, TrueLayer can’t “sell an instant, 24×7 product that experiences downtime every day. It needed to have confidence in the performance of its banking partner.”
Benjamin Woodcock, Payment Infrastructure Partnerships Lead, TrueLayer also mentioned:
“A really important element of our ClearBank relationship is that we don’t have incidents. Being able to scale a payments product with a partner that you can trust with operational resiliency is so valuable – it sounds simplistic to say ‘ClearBank just works’ but it does. Being able to rely on ClearBank frees us up to focus on growing our merchant base.”
Choosing a banking partner for TrueLayer’s closed loop payments was not only about the technical capabilities of its accounts or connectivity to FPS.
The company wanted a collaborative relationship “that would help them to enhance the product and appeal to the widest possible audience.”
TrueLayer’s closed loop product was “developed to meet the needs of ecommerce firms across numerous verticals including consumer retail, online marketplaces, travel and hospitality.”
The company found that “some of these merchants also wanted to understand the counterparties that were involved in delivering instant refunds and payouts.”
