Innovative payment app leverages savings from open banking to give consumers discounts

A new payment tool created by fintech start-up Volume is offering retailers the chance to create individual discounts to customers at the point of payment if they use their payment app in a service being dubbed Pay Now, Spend Less.

Volume’s services builds on the ability to under open banking rules to allow direct account-to-account (A2A) payments between merchants’ and online shoppers’ bank accounts in one-click, enabling participating ecommerce merchants to offer shoppers tailored discounts. 

These discounts, it says, are funded by savings made from bypassing the fees levied by conventional payment intermediaries, such as debit and credit cards, e-wallets and Buy Now Pay Later. These charge fees ranging from about 2% up to 8% on every sale to every business. That means, for every £100 spent on the internet, up to £5 is withheld by payment companies, whether the buyer is booking a taxi, ordering food, or buying a new t-shirt. 

Most businesses admit to passing these costs on to consumers. Even with these high fees, the money due to the seller can still take up to seven days to arrive in the merchant’s bank account. 

The launch – which sees Volume come out of ‘stealth mode following $2.4m round of funding – comes at a time when payment charges are continuing to rise. For example, in October 2021 both Visa and Mastercard increased cross-border interchange fees on purchases in Europe. The impact of high transaction fees on merchants — totalling $100bn annually, according to McKinsey — became highly visible in a 2021 public dispute, now resolved, when Amazon threatened to stop the use of UK-issued Visa credit cards. 

By enabling direct payments between shoppers’ and merchants’ bank accounts , Open Banking reduces these fees, potentially close to zero.

Eliminating payment intermediaries, the startup calculates that shoppers stand to save £3.2 billion annually in the UK alone,1 with merchants gaining instant settlement and substantial reductions in fraud. 

Simone Martinelli, co-founder and CEO of Volume, says: “Volume wants to create a financially sustainable Internet where money moves free of costs, from consumers to businesses and vice versa. To do that, both merchants and consumers alike need to be incentivised. Pay Now Spend Less is the next obvious evolution for debit cards. We are revolutionising payments in the same way that Klarna did for credit cards 10 years ago.”

Volume predicts that the discounts enabled by Pay Now Spend Less will increase dramatically the number of consumers choosing to use Open Banking. A2A payments remain relatively under-explored, used by under 4% of digitally enabled consumers in the UK2 – one of the most advanced markets in this regard. 

Besides a very poor user experience so far from the traditional banks, one other major barrier to adoption has been that shoppers have not been incentivised to switch payment methods. “Currently, merchants are able to avoid interchange fees with Open Banking,” continues Martinelli, “but this saving is not being passed on to consumers. By overcoming this limitation at a time of rapidly rising inflation, we predict our discounted payments solution will reduce the adoption of traditional payment methods, as shoppers opt for low-cost Open Banking purchases.” 

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