Payments platform Adyen has launched a new payment service powered by Open Banking.

The service is an alternative to card payments and takes advantage of the European Union’s second Payment Service Directive (PSD2) requirement for banks to create Application Programming Interfaces (APIs) for approved third parties to initiate payments on behalf of consumers.

Launching initially in the UK, but with scope to be rolled out into other European markets, Adyen stated that the new solution has payments authenticated directly between consumers and their banks, meaning, unlike with direct debits, merchants can avoid chargebacks generated due to fraud or an inability to capture funds.

A customer selects the payment type during the checkout process, at which point they are redirected to their bank’s online banking environment to securely confirm the payment.

Their bank utilises the customer’s preferred method of authentication - such as Face ID, Touch ID fingerprint recognition, or an online banking password - which enables the funds to be pushed directly from the consumer. This facilitates direct authorisation between the shopper and the merchant, and Adyen handles the payment flow between the bank and the merchant.

Due to the direct nature of this new payment type, Adyen explained that existing processing costs for higher transaction values can be significantly reduced. It also gives real-time credit transfers, guaranteeing the payment and enabling merchants to ship the product immediately.

Myles Dawson, UK managing director of Adyen. “Bank transfers between consumers and merchants are already extremely popular in mainland Europe because they offer greater fraud protection without adding friction to the payment process – we are excited to be the first payments provider to offer a fully-compliant, direct payment solution in the UK and it has been great to work with the Open Banking Implementation Entity to bring these benefits to consumers and merchants.”

Dutch airline KLM is the first major brand to rollout the new offering – the service is now live for its UK customers.

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