Open banking will provide a useful solution for franchised dealer groups that are reliant on expensive and inefficient card payments and bank transfers, argues Cian O’Dowd, co-founder and chief operating officer of Atoa, an FCA authorised payment institution.
Automotive dealerships today operate within the backdrop of rapid payment innovation. But something is stopping dealerships from fully embracing recent payment technologies. With customer expectations evolving in the case of purchasing a vehicle, we consider that it will be important that automotive dealerships understand what more modern payments could bring to their business and customers.
Traditional payment methods are failing automotive dealerships
Currently, the overwhelming majority of automotive dealerships depend on card payment networks and bank transfers. Cards are typically used for smaller transactions like deposits and repairs, and bank transfers are favored for larger purchases reminiscent of the vehicles themselves. So what’s the issue?
Card payments will be expensive and expose dealerships to slower money flow and chargeback risks, making them unsuitable for giant transactions.
While seemingly “free”, bank transfers create hidden costs in back-office operations, as staff waste hours finding and allocating payments, especially when coping with missing references and ghost payments not matching a automotive or customer. Research from a few of our existing work with dealerships tells us that the time spent finding and allocating manual bank transfers conservatively costs them £4 per payment in labour costs.
Think also about your customers’ experience. Sales staff without checking account access often cannot confirm if bank transfer payments have been settled, especially over weekends when finance teams aren’t working. Which means many dealerships in 2025 still don’t release cars over the weekend – when many purchasers need to buy.
The blockers and challenges related to the present mixture of card payments and bank transfers add up and create a situation in need of a treatment. But the reply might already be available – Open Banking.
Open Banking is where authorised third-party payment providers use secure application programming interfaces (APIs) and may access customer data shared by banks to reinforce financial services for users. It offers immediate settlement, lower transaction costs, and protection against chargebacks.
A key advantage for the automotive industry is that these payments can include reference numbers, reminiscent of customer or automotive registration details, which enable easy payment reconciliation and permit sales staff to confirm payments while not having checking account access or contacting the finance team.
This speedier payment process can result in faster automotive releases – even over the weekend. Which means your weekend automotive shopper can complete the sale there after which, and staff can increase sales conversion rates and reduce the “days to sell” per vehicle.
What’s holding us back?
My view is that the automotive industry is well-suited for payment innovation. All of the ingredients are there – high-value transactions, tight profit margins, and a continuing drive for efficiency and enhancements in customer experience.
While attempts to transition to Open Banking have been made, its adoption remains to be in its early stages throughout the sector. This could be because many solutions aren’t “able to use” and fail to handle challenges like high-value payments and seamless refunds.
On top of this, major banks often only provide APIs that require integration by software developers, putting Open Banking out of reach for dealerships lacking dedicated development teams.
One other barrier we’ve noticed in the case of dealerships exploring Open Banking solutions is their uncertainty in regards to the provider’s essential regulatory licenses, potential security risks and accessibility to accurate credit checks on customers. That’s why it’s vital to make sure their chosen vendor has the relevant licenses and certifications to operate inside this space. Trust and security are critical when handling financial information.
Introducing “dealership ready” Open Banking
My view is that Open Banking solutions have to tackle a “dealership ready” approach to tap into this industry. By this I mean they should move from developer-focused APIs to systems that dealerships can use “out of the box.”
Firstly, Open Banking solutions ought to be designed with security front of mind, with strong customer authentication (like Face ID or fingerprint scans) for payment approvals. It will not only protect sensitive payment details as a safer alternative to sharing card details over the phone but in addition eliminate the chance of chargebacks.
With regards to credit checks, Open Banking providers should allow dealerships to access Account Information Services (AIS) APIs, which give a quick, accurate, and cost-effective way to envision client credit in real-time, versus traditional credit reporting agencies which can be often costly and time-consuming.
At Atoa, we be certain that payments are generated with relevant references, saving sales teams time on reconciliation and enabling them to simply access payment confirmations without the finance team. Because of this, payment verification is simplified and cars will be released quicker on weekends.
Seizing future opportunities
Because the world starts to wake as much as the advantages of Open Banking, awareness stays the largest challenge. Each customer and merchant awareness on how Open Banking is a secure and efficient alternative remains to be lacking, but hopefully with time and greater usage, this can increase.
With regards to payments, dealerships should consider current challenges and their future needs. Open Banking can improve processes, streamline operations, reduce payment fees and enhance customer experience.
It would sound complicated – even daunting – nevertheless it’s really not. Fintechs are well-positioned to drive this innovation as a result of their agility and deal with developing “dealership ready” experiences. Find the proper partner and explore the benefits Open Banking can bring.
Writer: Cian O’Dowd, co-founder and chief operating officer of Atoa
This Article First Appeared At www.am-online.com
