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Richard Carter, CEO and co-founder of OrderPay, tells us the benefits and customer incentives Open Banking could bring to the hospitality industry

Outside of fintech circles, Open Banking can be a hard sell. The word ‘open’ next to the word ‘banking’ is a little daunting to some, and to be blunt, most people just have no idea what it is. 

Therefore, it’s important to speak about Open Banking in terms of benefits. And when we’re speaking of the hospitality sector, those benefits could be huge. I speak to hospitality business owners on a daily basis, and I find that many are confused by their payment fees and are not aware of Open Banking. But when I explain that they’re probably paying too much for every transaction, they’re very willing to explore alternatives. 

Some hospitality experts are already excited by the prospect of Open Banking. Strahan Wilson, CFO of State of Play Hospitality told me that ‘consumer Open Banking payments represent a fantastic opportunity to deliver material operational savings for the sector.’ 

Brandon Stephens, the Founder of Tortilla, another forward-thinking hospitality business, agreed. He commented that ‘the opportunity to embrace the accelerated digital adoption and cut payment terminal fees in half with Open Banking is very exciting indeed.’

Up until recently, the payment terminal has been a firm fixture within hospitality, and a costly one at that. In fact, most operators don’t know just how costly. If you ask businesses how much they pay per transaction, most will give you the headline transaction fee given by their provider, which can be as low as 0.3%. But once you get into the small print, the interchange fees, the monthly charges, and ad hoc costs, the figure is often closer to 0.6%. Paying twice as much as expected can lead to unexpectedly high monthly invoices, and when added up could be costing the industry millions each year.

The way customers pay is shifting – the QR code is signalling the end of the traditional card reader – but the potential for providers to take a hefty percentage of each transaction remains. This is where Open Banking comes in – there’s huge potential to build upon the tech that customers are now used to, but reduce the cost to the venue by changing the payment process behind the scenes.

Previously reluctant to implement too much technology, the hospitality sector is starting to reap the rewards of the semi-enforced introduction of QR codes and other tools during the pandemic – concerns about losing tips and replacing that personal touch have now been largely put aside, with businesses who embraced the technology finding that tech has led to more tips, higher spend, and more efficient operations. Hopefully, industry leaders can foresee the gains to be made from implementing Open Banking and push for change.

Hospitality has a unique opportunity to benefit by introducing Open Banking as the customer is already on a committed path, unlike online retail where at checkout they’re presented with half a dozen options and can still walk away. Alongside traditional cash and card, if a restaurant were to offer payment by Open Banking and take even a small percentage of business through it, they would immediately see a difference in their bottom line. Open Banking enables operators to maintain the same service and security during the payment process but breaks them free from the additional fees for authorisation, PCI non-compliance, corporate, and credit card charges.

To change the way customers pay will of course be a challenge. Consumers won’t change their habits without an incentive, but Open Banking allows hospitality venues to reward their customers for making a small change that could save them thousands each year. For example, guests would likely switch to a different payment method if they were given an immediate discount. And in return, the venue gets insightful data on top of saving on transaction fees. This data can in turn be used to present guests with personalised offers based on their spending habits, continuing the cycle of benefits to both customer and business owner.

In fact, this is a trend we’ve recently seen when researching for our upcoming white paper, with 45% of respondents stating they’d be willing to share more personal data to receive bespoke offers and suggestions which were tailored to them.

Looking ahead, the adoption of Open Banking in hospitality will hopefully lead to 3 things: firstly, this could save the sector millions in hefty payment fees. Secondly, it could put an end to the murky world of hidden fees and charges. And finally, it will help venues understand their customers even more, leading to a more personalised experience for guests at a much lower cost to businesses. I’m open to that.

About Richard Carter

Richard has over 15 years experience in CRM, loyalty and business development. Richard started his career at Accenture, before running Shell’s Loyalty Programme in Central & Eastern Europe, and then becoming part of the founding team at receipt marketing scale-up, Ecrebo.

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About OrderPay

OrderPay take orders and payments, wherever and whenever venues and customers want. Every base is covered – from a slick app to a web-based Pay Only solution. With tipping, tabs, bill splitting, gifting, and analytics offered as standard, OrderPay is the UK’s fastest, most flexible and most cost-effective Order and Pay solution.

Mobile: the future of payments

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Remember the days of paying for the bus with cash? Scrabbling around at the bottom of your bag for the handful of change you know is there somewhere.

Or that moment when you realise you’ve left a note in the jeans that are now whizzing around your washing machine. 

Although cash isn’t quite dead, these kinds of problems are largely a thing of the past. And the pandemic has massively accelerated the shift towards a cashless society. We’re all used to paying by card now, (and younger people know nothing else), so the transition from card payments to mobile payments seems an inevitable next step.

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For better or worse, our phones rarely leave our hands. It’s no surprise then that we’ve started using the same device we use for almost everything else to make payments – in fact a study found that in-store mobile payments grew 29% in the U.S last year.

The benefits are clear – whipping your phone out of your pocket and tapping it to pay for your coffee is likely to be quicker than finding the debit card in your wallet. Meaning you’re not holding up that guy behind you desperate for his oat milk latte, and the staff can serve more people throughout the day. The same applies to taxis, hairdressers, dry cleaners and anywhere in between – the time spent searching for your wallet, the card machine, or the correct change is time we can all get back.

But it’s not just time saved. Small business owners spend thousands each year in hefty payment transaction fees. Taking payments with lopay (via mobile or a card reader) costs only 0.79% per transaction, well below the fees charged by other providers. So small businesses can save money, regardless of whether their customers have made the switch to mobile payments yet.

Although physical cards aren’t a relic of times gone by just yet, it’s clear that just as we moved from cash to card payments, we are seeing a shift from cards to mobile phones. Maybe one day we’ll look back at waiting for a card reader and inserting our card with the same nostalgia that we look at counting our coins to get on the bus…

Start taking mobile payments today. Simply download the lopay app here. 

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© 2022 Checkfer Ltd

© 2022 Checkfer Ltd