Paying for energy and utilities
Open banking payments have helped to revolutionise the way consumers and SMEs can manage their energy and utility bills, as well as streamlining payments collection and offering cost savings on card processing costs for firms.
Open banking enables direct, near real-time transactions between bank accounts and utility providers. For consumers and SMEs, this can translate to cost savings, more transparent billing and greater visibility over their spending, as we set out in the examples below.
QR Codes
Following its partnership with fintech firm Ecospend-Trustly, water company Anglian Water included QR codes on monthly bills, allowing customers to set up a direct bank transfer. Ecospend’s technology also enables customers to receive bills via text and pay by phone, as well as an open banking-enabled ‘Pay by bank option’ on the Anglian Water website and app.
Minimising manual errors
Similarly, a partnership between American Express and OVO Energy gives the company’s four million customers who pay their bills monthly the option to ‘Pay with Bank’ transfer rather than use debit or credit card, cheque or Faster Payments. Choosing this way to pay means customers don’t have to type in any reference numbers, reducing the risk of manual errors and misallocated payments, benefiting both the customer and the receiving firm.
Customers also get visibility of their bank account before their payment is processed, giving them a clear view of their finances before they confirm their payment.
Pay-As-You-Go customers
Retail technology provider PayPoint is one of the first open banking providers to offer open banking bank-to-bank transfers to Pay-As-You-Go energy customers as a payment initiation service provider (PISP).
Customers select the ‘Pay By Bank’ option on the merchants' website or app – in this case, an energy or utilities firm – and consent to the payment. PayPoint, as the PISP, connects to the customer's bank account and the customer authenticates via their banking app. The PISP then initiates the payment which is processed by the customer’s bank and transferred to the merchant’s account, usually within two hours.
“PayPoint is currently one of the only open banking providers that can provide PISP payments to Pay As You Go Customers by completing the payment and vend (top-up) seamlessly together.
PISP payments are more straightforward than traditional card payments and offer a number of benefits, including lower transaction costs, near real-time settlement and an improved customer experience with a secure and simple payment journey.”
Jo Toolan, PayPoint Managing Director, Payments
Variable recurring payments
Looking ahead, Variable Recurring Payments (VRPs) enable a more flexible way for consumers and small firms to pay bills. Because the payments are instructed 'within customer-defined parameters', customers can set a limit, say for a month, which limits payments to say, £50 per month for electricity.
This avoids unexpected billing and gives end-users reassurance that they won’t be pushed into overdraft if an unexpectedly large bill lands or if monies owed have been incorrectly calculated, requiring them to reclaim the funds.
The implementation of smart data also allows for more personalised service offerings (see our case study with Ordo and Eviden on the next page). Consumers can benefit from tailored energy usage plans that match their consumption patterns, leading to better budget management and potential cost reductions.
For example, real-time data analysis can suggest the most cost-effective times to use energy-intensive appliances, such as washing machines or electric vehicle chargers, helping to avoid peak tariffs and reduce overall expenditure.
