Fintechpodden (FP): Can you please give us an introduction to recurring payments? Where is it most usable?
I think that we all have been using a form of recurring payments for many years. The vast majority is customers of a subscription-based service, like Spotify or Netflix, where they are using our card details to withdraw money for their services. The solution that we are developing, is a new version of recurring payments, based on a completely different type of technology. It’s based in the open banking technology sphere, rather than old sorts of technology.
It’s usable for all sorts of companies that are getting paid on a subscription-based way, like monthly payments, companies that have a membership approach or for companies looking into recurring revenue to get a steady revenue stream. All those companies can look in to open banking recurring payments straight away. The functionality is there, and it is very user friendly.
FP: Is recurring payment only available for the same amount every month or can you have flexible amounts, like say your electricity bill that can vary each month? Is that supported as well?
There’s one version right now, and the next version comes with new levels of functionality. So, what we can offer right now is pre-defined recurring payments. That means the date and the amount is predefined.
For a subscription, say for a music or movie service, where you know the amount is 109 SEK each month the current payment solution is ideal. But for an electricity bill or a mobile bill where the amount can vary depending on usage, the next version will suit. In 2023 we will have what’s called variable recurring payments.
FP: Sounds interesting. You mention PSD2 and open banking. What other benefits do you see with your solutions compared to traditional solutions, like invoice and credit cards?
If we start from the customer’s side, I think the simple approach is something that is very useful. I think that many people have been looking into autogiro and thinking that they should, but that it’s hard and a bit complicated. Our Recurring payments is set up with a simple payment flow. It almost always resembles a single payment, that I think a lot of us have been doing already, where we choose the bank and account and then authorize the payment.
On the merchant’s side, there are many benefits as well. Let’s say that the money is supposed to be deducted at the last of the month and the balance is too low; the recurring payment will keep on trying to fetch the money to fulfill a complete payment and will continue to do so until the payment is done. That adds stability and predictability as well. You know that you will get paid as soon as there is enough money on the account.
Another perspective is the price. Recurring payments are cheaper than for instance autogiro, so you can save a lot of money going into our Recurring payments.
FP: You have talked about the signup flow for the end user, but can you describe it a little bit more? If they use a recurring payment signup process delivered by Finshark, what different ways of signing up are there?
I would say, that today, most companies get paid through either an app or a website, which are the most common digital payment methods. In some cases, you initiate the payment through a text message or an email, but it doesn’t matter what kind of channel you use to interact with your customer, as long as you have the possibility of either attaching a link or something that can initiate the payment.
Let’s say that you are on a website and the button says “pay”. You press the button and open the payment flow, which is what Finshark delivers. In that flow you choose your bank and the account you want to connect to the recurring payment, and then you authorize it by signing with your BankID, MitID or whatever SCA is applicable in your country. By that time, you have given the merchant consent to deduct the same amount of money at the same date each month, for as long as it’s defined within the payment.
That is the existing version, and in the next version you will also have the option of changing the amount as well.
FP: Do you have any other interesting stats on the market development for recurring payments?
We can look into the market right now and compare it to some of the existing alternatives that are out there, because there are not any numbers for recurring payments that are based on open banking technology so far.
If we look at autogiro for instance, there are numbers from Swedish Riksbanken; In 2020 there were 448 million transactions in Sweden made with autogiro. It is a huge number of transactions, and the monetary amount was over 630 billion SEK during 2020. So, we can see that just by replacing a small portion of the autogiro market the numbers are really big.
Thank you Fintechpodden for inviting us to your podcast. Please subscribe to their podcast!