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Future of Retail Q1 2024

How open banking is delivering next-gen retail payments

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Richard Newman

Director of Corporate Affairs, Open Banking Limited

Open banking payments are taking off, reaching a record monthly high of 14.45 million in January 2024, compared with 8.55 million in January 2023: a year-on-year growth of 69%. 

Open banking has already established itself as a secure and convenient way to make payments, providing a great opportunity to create a next-generation ecommerce experience for consumers and vendors alike.

Frictionless customer experience

These payments were designed for digital channels and are helping to transform online buying with growing numbers of shoppers choosing this secure and intuitive way to pay for purchases, eliminating the need to manually enter card details. Late last year, Apple® unveiled its Connected Accounts, which allows users to connect their accounts to eligible debit and credit cards in their Apple Wallet® via open banking technology and see their balance information to help them better understand and manage their spending.

Open banking advantages for vendors

Open banking enables ecommerce merchants and retailers — from multinationals to one-man bands — to save money on transaction costs when compared to the fees associated with taking cards. It also enables vendors to confirm receipt of funds before releasing goods, enhancing financial security.

With card payments, merchants can wait up to five business days for card transactions to reach their accounts. In contrast, open banking enables fast settlement, in near real-time, which can help streamline cashflow and speed up account reconciliation.

Another advantage offered by open
banking, compared with card payments,
is the ability to offer fast refunds.

Adoption by leading retailers

With more consumers (a recent survey said 30%) regularly using banking apps, those online and high street retailers that offer a ‘pay by bank’ option as part of their payment mix will see adoption continue to grow. Already, UK shoppers can choose to make an open banking payment on one of the world’s largest online shopping platforms, a leading European home furnishings brand and a major high street health retailer.
Another advantage offered by open banking, compared with card payments, is the ability to offer fast refunds. Open banking payments are direct account-to-account payments, so if a refund is needed, there is no longer the frustration of having to wait up to five days for a refund. Consumers could see their money refunded immediately.

This latest chapter in the payments story is long overdue, and we have only scratched the surface. As adoption continues to grow — there are now 9 million UK consumers and businesses using open banking — it’s a win–win for both.

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