Software Spotlight 🎙️

Software Spotlight 🎙️

Wonderful revolutionises payments with Open Banking. Huge thanks to Michael Bernzweig for inviting me to guest on his show, Software Spotlight last week.

Show notes

In 2016, Kieron James, now CEO and Co-Founder of Wonderful, was running a telecoms business when he encountered a problem that would spark the idea for his innovative fintech venture. His son, who was fundraising for a teenage cancer charity through a parachute jump, discovered that a significant portion of the donated funds would be lost to intermediaries in the payment process.

This realization led James and his team to create, a completely free online giving platform. “The model for funding that platform was corporate sponsorship,” James explains. “So we initially, as the telecoms business said, we'll fund the first million pounds that gets raised through the platform, and then we'll look for a corporate sponsor with deeper, deeper pockets.”

Kieron James, CEO of Wonderful, leveraging open banking for secure, instant payments at lower cost.
Kieron James, CEO of Wonderful, explains how open banking enables secure, cost-effective payments.

However, as the platform's popularity grew, so did the costs associated with processing card payments. “What we found was as that platform's popularity grew, we just had kind of this linear relationship between the amount of donations that we were processing and the cost of getting that money to the charities,” James says. “So we started to look for a solution because we thought this is creating this really low ceiling on our impact and reach we can only grow so large and reach many charities and fundraisers and donors as card processing allows us to reach.”

Discovering the power of Open Banking

The solution presented itself in the form of open banking. As James describes it, “What happened when we discovered open banking was that we found a method of moving the donor's money from their account to the charity's account in one tap on a mobile phone or a couple of clicks on a laptop. And essentially, that money was moved directly from that account into the charity's account with only one intermediary rather than several intermediaries.”

Open banking enables direct bank-to-bank transfers, bypassing the credit card processing networks and their associated fees. “It was a bank-to-bank transfer but a super simple very secure immediate transfer with a fraction of the costs associated with cards,” James explains.

A seamless user experience

From a consumer perspective, open banking offers a much more streamlined payment process compared to traditional card transactions. Instead of entering a 16-digit card number, CVV, expiry date, and other details, the user simply selects their bank from a list and authorizes the payment within their familiar mobile banking app.

“You're taken basically to the very next step, that confirmation of the payment,” James describes. “And what will happen is you'll do that confirmation in an environment that you're super familiar with, very confident about using because it's your mobile banking app… Essentially, all you're doing is saying, I'm going to pay £55 to this particular merchant, and you're authorizing that in the banking gap. So super secure and no data to lose, no data to misenter. And a lot more convenient.”

Significant cost savings for merchants

For merchants, the cost savings of open banking are substantial. While major card processors in the UK typically charge around 1.4% per transaction plus 20 pence, Wonderful has eliminated the percentage fee and reduced the flat fee to just 1 penny per transaction.

“It's a penny a transaction with no percentages,” James confirms. “So that gives you a sense of, in our scenario, it's probably a lot more than 90% saving.”

Expanding to serve UK small businesses

Currently, Wonderful has launched its open banking solution in the UK, with an initial focus on the charity sector. However, the company is now expanding to serve the country's 5.5 million small businesses.

“It's only fairly recently we've started launching our commercial services,” James says. “The first integration that we've done with an e-commerce platform is with WooCommerce on the WordPress websites. So that's available now for merchants in the UK.”

As Wonderful integrates with more e-commerce platforms, the potential for widespread adoption of open banking payments grows. With its significant cost savings and improved user experience, open banking presents a compelling alternative to traditional card processing.

What is Open Banking and how does it work?

Open banking enables secure, direct bank-to-bank transfers without the need for intermediaries like credit card networks. Consumers authorize payments within their mobile banking app, and funds are transferred instantly from their account to the merchant's account.

How much can merchants save by using Open Banking payments?

Merchants can save over 90% on payment processing fees by using open banking instead of traditional credit card processing. For example, Wonderful charges just 1 penny per transaction with no percentage fees, compared to the typical 1.4% plus 20 pence fees charged by major card processors in the UK.

Is Open Banking secure?

Yes, open banking is highly secure. Payments are authorised directly within the consumer's mobile banking app, eliminating the need to share sensitive card details with merchants or intermediaries. This reduces the risk of fraud and data breaches.

What countries have adopted Open Banking?

Open banking has been adopted in several countries, including the UK, EU, Australia, Brazil and Canada. Adoption is driven by regulatory initiatives aimed at increasing competition and innovation in the financial services sector.

How can merchants start accepting Open Banking payments?

Merchants can start accepting open banking payments by integrating with a provider like Wonderful. Wonderful has already launched an integration with WooCommerce on WordPress, making it easy for UK merchants to accept open banking payments on their e-commerce sites. As more integrations become available, adoption is expected to grow rapidly.