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Cardless and careless: how open banking and SmartPay simplify online payments


A little background…


In 1994, a transfer to a beneficiary from another county took up to 7 (seven!!) days, and the payment documents circulated by... mail. In 2001, Romanians could place an order on one of the first online stores in Romania, with cash on delivery payment. Since 2006, transfers in lei are settled electronically, on the same day or within 24 hours at the most, within an electronic payment system that reflected, at the time of its launch, a huge advance for business and the banking system. Now we no longer measure progress in years, because every day new technologies, such as open banking (through account-to-account payments), are changing the way businesses and customers act in the markets.


Open banking vs. traditional banking


Open banking means that banks are no longer the absolute masters of the payments landscape, but compete directly with fintechs and other financial entities, which are innovating at an amazing speed. Open banking represents (another) revolution in finance, facilitating third-party access to bank customers' financial data through application programming interfaces (APIs). This access is of course done in a secure and controlled way, always with the explicit permission of the customers. The main purpose of open banking is to stimulate competition and innovation in the financial sector, giving consumers and businesses access to new options and personalized financial services. Third parties may use financial data to provide personalized services such as investment advice, personal budget management, credit offers tailored to individual needs, and of course payment services. In the EU, open banking is strongly supported and regulated by central banks to ensure data security and privacy. The EU PSD2 Directive (Revised Payment Services Directive) facilitates the development of open banking.


So now we're talking about a new normal - instant payments. Why wait for the execution of your payment order? An instant payment will be executed in a maximum of 10 seconds from the moment of authorization, and the beneficiary will have funds immediately. Instant payments are widespread in Europe, and in Romania they are currently available through open banking at five banks: BCR, BRD, ING, Libra Bank, CEC, plus Revolut, being regulated by the new European payments directive and supported by the BNR.

What do instant payments actually mean? When a customer places an order, they can choose between different payment methods: for example, Google Pay, Apple Pay, Netopia mobilPay, or cash on delivery, with a Visa or Mastercard card. Sometimes customers are reluctant to enter their card details on e-commerce sites (yes, it's another reason why some Romanians choose to pay cash on delivery). Then, looking from a merchant's perspective, there is a period of one to three days in which they wait for the amount to be received in their bank accounts through the usual payment methods. Three days can mean a lot when there is constant pressure on online stores to increase their operational efficiency and to have a constant cash-flow, in a market with fierce competition. I would say, therefore, that online stores use absolutely every opportunity to bring added value to their customers and increase their chances of achieving the much-desired success. In online commerce, shortening the transaction settlement period is beneficial, because the idea of ​​online commerce is also to be very fast. This is where instant payments come in, available both on traditional banking channels, already used successfully, and in open banking as a novelty in our country.

Therefore, a money transfer that is executed in a maximum of 10 seconds is, from the perspective of all involved, an opportunity not to be missed. And if I haven't emphasized this well enough, I'll say it again now: these open banking solutions can be provided by technology companies and used with complete security.


Test SmartPay – payment initiation solution


That's why I tested for you a new payment method that caught my attention: SmartPay.


The seller wants to quickly prepare the packages, after receiving the orders, so that they reach the impatient customers as quickly as possible. And, of course, he is just as eager to receive his dues. Can we have a safe, easy, fast solution for the satisfaction of consumers and sellers alike? It seems so.


The EU has encouraged the transition to Open Banking, so that third-party providers carry out payment initiation operations, which help consumers make instant payments as an alternative to established methods, and offer account inquiry services, through which users can quickly find out everyone's balances accounts in one place. The EU Payments Directive has favored the emergence of several third-party providers of financial services, so that, at the European level, the trend is an upward one. The country with the most authorized third-party providers is Sweden, with 39 such players, at the opposite pole is Romania, with 2 providers authorized by the National Bank of Romania, the first of which is Smart Fintech with the payment initiation product, SmartPay .


SmartPay is, therefore, an account-to-account payment solution developed by Smart Fintech - a 100% Romanian third-party provider authorized by the National Bank of Romania since 2021, its particularity being the new, innovative, open banking technology it uses.


The SmartPay product is the first payment initiation service authorized by the National Bank of Romania, with the role of payment accelerator - being able to be integrated into any application that manages financial resources in any form, such as electronic invoicing, accounting, ERP and treasury systems, payroll or personal finance management.


SmartPay is integrated with 13 important banks in the country, such as ING, First Bank, Alpha Bank, Libra Bank, Garanti Bank, BCR, Banca Transilvania, OTP Bank, Revolut, CEC Bank, BRD, Raiffeisen Bank and Unicredit. Furthermore, the product can be easily integrated into the platform of any partner who wants to offer their customers alternative online payment methods.


Through SmartPay, customers of online stores can pay for purchased products/services in a fast and secure way, without using a bank card. Thus, in the order completion process, the customer chooses SmartPay as a payment method and selects the bank from which to pay. It is then automatically redirected to the payment authorization in the chosen bank's app, and settlement takes place in up to 10 seconds for instant payments, same day or next day, depending on the bank. An online store can offer SmartPay on any of its own purchase channels, and its customers have account-to-account payment at their fingertips.


Customers can pay online by selecting SmartPay when purchasing online, pay invoices directly from the e-invoice app with a payment link or QR code, pay from their mobile app, from an email, payment notification, or SMS secure, they can even pay directly from the chat where the seller interacts with them.


Case study – Maison Olfactif online store


We tested SmartPay on https://www.maisonolfactif.com, an online perfume store, and the first to implement this solution. The merchant offers several payment solutions for purchases, including SmartPay.


A screen capture from the maison olfatif website

How does it work? Well, I initiated an order and chose SmartPay as my payment method. This option allowed me to choose which bank I would pay through, very easily and quickly. The app then directed me to the banking app of the bank I chose for payment, where I logged in as usual and authorized the transaction. I didn't need to enter my card details, a direct and quick transfer will be made between my account and the merchant's account for settlement. I appreciated the ease of use and the fact that no card details were required, which greatly simplified and shortened the purchase process. Additionally, if a buyer has concerns about using their personal card, well, this payment method makes things much simpler by using a simple transfer between accounts.


A screen capture for payment details on a website

A screen capture for selecting banks in an open banking payment method


A screen capture informing the login to the bank
A screen capture of a bank login screen
A screen capture from the open banking payment app SmartPay

To conclude


SmartPay is the first payment initiation application I'm testing, integrated with the banking system, that can be used by providers of online products and services.


Additional information is available at: https://www.smartfintech.eu/

You can also test the app here with a donation to the Red Cross.


 

Author: Camelia Cojocaru, ITChannel

With a varied background, Camelia is interested in new technologies and how they simplify and streamline both business processes and our everyday lives. She has accumulated more than 20 years of experience in banking, a career during which she witnessed the development of payment systems in Romania and directly contributed to the modernization of the way banks and customers alike make payments and settlements. Since 2012, Camelia has taken a step into the academic field, using her corporate experience in teaching and research activities. With enthusiasm and passion, he works with business students on the same coordinates of the efficiency of operations processes and the use of technologies in business. For more than ten years, Camelia has also been writing for technology magazines, on the same topics, thus adding a new dimension to her experience, the entrepreneurial one.


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