Open banking payment to become dominant, says Bumper

Open banking will become the dominant form of payment in car retailing by the end of the decade.

According to Bumper, dealers would benefit from the halving of their transaction costs and reducing their exposure to fraudulent card transactions.

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.

James Jackson, CEO and co-founder of Bumper, said: “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.

“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,” added Jackson.