How does an Open Banking payment flow work, in general?
- Shopper selects Open Banking payment method in the checkout
- Payment vendor authenticates the shopper and validates funds in real time
- Merchant receives funds instantly or nearly instantly
To understand how this works, we will use the example of purchasing an item from an online shop, though the concept applies to buying any services or transferring funds online. Rather than choosing to pay by card or invoice, the shopper selects an Open Banking payment method in the merchant’s checkout.
Via the API for this particular shopper’s bank, an Open Banking payment vendor is able to authenticate the shopper in real time and initiate the payment. Since the shopper is paying from their bank account, the payment vendor validates that the funds are available and the payment is made to the merchant instantly.