Introducing the Standing Order 2.0: How Open Banking just made recurring payments easier

When’s a Standing Order not a Standing Order? When it’s a Modulr-powered, API-enabled fixed recurring payment.

In this blog we take a look at how, thanks to Open Banking, fintech is applying its magic to the next iteration of this longstanding transactional banking instruction.

(Traditional) Standing Orders explained

We’ve all heard of them, we invariably all use them, but what exactly is a Standing Order? A Standing Order is an instruction that an account holder gives to their bank to make payments of a fixed amount at regular intervals. Payments are made automatically by the bank on a defined schedule (e.g. weekly or monthly) on an ongoing basis, unless a specified condition has been met, such as an end-date being reached or a set number of payments having been made. Standing Orders can only be created, amended or cancelled by the account holder, typically by using their online or telephone banking service. They are most commonly used for recurring payments where the amount stays the same, such as rent payments, subscription services or regular account top-ups.

How is a Standing Order different to a Direct Debit?

Standing Orders and Direct Debits are similar in so much as they both move money automatically from one account to another on a recurring basis, but they operate in different ways. The primary difference being that the account holder is in full control of a Standing Order, whereas a Direct Debit is authorised by the account holder and managed by the receiving company. Check out our Direct Debit product page to learn more about Direct Debits.

Standing Orders are an important part of the automated payments landscape but are not without their limitations. Businesses are reliant on customers taking the time to set up the standing order with their bank and it’s a fragmented customer experience. It’s clunky at best, and error prone and unreliable at worse. After all, your customers are busy people and won’t look kindly on having yet another thing to add to their to do list. Fortunately, Open Banking allows us to revamp and innovate Standing Orders.

Open Banking – opening up the payments playing field

The introduction of Open Banking across the UK and EU is arguably one of the most significant events within financial services in recent times, allowing fintech innovators, like Modulr, to break free from traditional operating constraints and reimagine many financial services.

And now, just as Open Banking has revolutionised other areas of payments, it’s now being used to bring the longstanding Standing Order into the API-enabled digital age.

These are not just Standing Orders, these are Open Banking Standing Orders 

Standing Orders created using Open Banking work in the same way as traditional instructions but, crucially, are initiated from within a business’s mobile App or website, as part of a single customer journey.

Until now, Payment Initiation has been used for one off payments but Modulr clients can now use this Open Banking innovation to enable their customers to set up recurring payments and thus a new type of Standing Order is born.

Introducing Standing Order 2.0 – the latest feature of Modulr’s Payment Initiation Service.

A Standing Order, but not as you know it

Standing Orders 2.0 set themselves apart from traditional instructions because businesses aren’t reliant on the customer going to their bank account to set them up manually.

Using our Payment Initiation Service, businesses can take their customers directly to their bank, offering an unrivalled, straight-through customer  experience. Recurring payments set up in this way are cheaper than other payment methods, more secure and less prone to error as payment details can be prefilled.

Seamless transaction journeys lead to better conversion rates and by providing an integrated payment flow, engagement also goes up. What’s more, settlements are made using the Faster Payments Scheme, meaning they will arrive instantly in the receiving account the same day, rather than after a delay of three days or more via the card settlement process.

While all businesses with regular invoices or receiving regular payments for their services have much to gain from offering this quick and easy payment experience for their customers, there are certain industries where this innovation promises to be transformative.

Recurring rent payments, reimagined

The process of setting-up recurring rent collections via Direct Debit   or using card details held on file often results in a poor customer experience during set-up, which in turn can lead to abandonment. These collection methods can also be costly and settlement timelines problematic. Rent collection via standing order is more common but the onus is on the tenant to set up and the process can be error prone if the wrong information is provided to the bank.

With our service, payment details can be prefilled by the landlord so the risk of error is eliminated, all the tenant has to do is confirm the Standing Order payment details in their familiar banking App.

The landlord has greater confidence that the instruction has been created by the tenant’s bank, and the tenant benefits from a superior customer experience.

Recurring account top ups for Wealth Management & Crypto Businesses

Businesses in the wealth management and crypto space traditionally offer recurring account top-up facilities to their customers using Direct Debits or card-on-file transactions but these are cumbersome to set-up, can be costly to administer and the settlement timelines problematic.

The superior customer experience offered using Open Banking is well suited to integrating within modern wealth management and crypto apps. It’s quick and in only a few clicks a customer is able to set-up a regular top up straight into their account.

More secure than card-on-file transactions, the next gen Standing Order also affords greater end user control, with customers able to easily amend future payments within their online banking environment.

Standing Orders made to order   

So, what do you get when the humble Standing Order meets the Open Banking empowered FinTech? The answer is a supercharged recurring payment solution that’s not only faster, cheaper and more reliable, but that also keeps your customers on your platform for longer while delivering the customer experience that the digitally demanding expect in this, the instant economy.

Want to discuss how you can adopt Open Banking powered Standing Orders?