Senior Strategy & Policy Lead, Open Banking
Open banking payments are taking off, reaching a record monthly high of 11.4 million in July 2023; double the number recorded for July 2022.
Open banking has already established itself as a safe and convenient way to make payments. This new way to pay provides a great opportunity to help transform ecommerce payments.
Frictionless customer experience
These payments were designed for the digital world and are helping to transform the online buying experience with growing numbers of shoppers choosing this secure and intuitive way to pay for purchases, eliminating the need to manually enter card details. There are many advantages for vendors, too.
Open banking provides the opportunity for ecommerce merchants and retailers — from multinationals to one-man bands — to save money on their transaction costs when compared to the fees associated with taking cards. One B2B retailer told us that card processing costs were growing out of proportion to its sales revenue, to the point where card processing costs were eventually taking up 10% of its pre-tax profit.
Open banking also tackles other common payment pain points by enabling fast settlement of payments and simplifying the reconciliation of accounts, which streamlines administration.
UK shoppers can choose to make an open banking payment on one of the world’s largest online shopping platforms
Adoption by leading retailers
As with any innovation, familiarity is key, but 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, a major high street health retailer and a popular DIY store.
Another advantage offered by open banking is the ability to offer faster 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 to receive 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, it’s a necessary win–win for both consumers and businesses.