Payments via Open Banking will peak within five years, research shows

By Puja Sharma

One in four UK Merchants predicted Open Banking Payments will become the most popular payment method amongst customers in the next 5 years, as per the research commissioned by EML.

The survey of payments decision makers highlights the growing confidence in open banking as a payment method and marks a significant step forward towards general adoption of the technology.

The global Open Banking market is expected to grow from $11.79b in 2020 to $15.13b in 2021 at a compound annual growth rate (CAGR) of 28.4%. The change in growth trend is mainly due to the companies stabilizing their output after catering to the demand that grew exponentially during the Covid-19 pandemic in 2020. The market is expected to reach $37.77b in 2025 at a CAGR of 25.7%.

The surge in usage of online platforms for making payments is contributing to the growth of the open banking market. The digital payment system is rapidly expanding with developing payment methods, increased e-commerce use, improved broadband access, and the advent of new technologies, as reported by IBS Intelligence.

”The survey results are encouraging, demonstrating a step-change in merchant awareness and appreciation of open banking payments. The increase in uptake observed by respondents and predictions for the technology to become the most popular payment method in the next 5 years point to a growing understanding of the value of open banking,” commented Brian Hanrahan, CEO, EML’s Nuapay Business Division. 

Around 43% of respondents said they have yet to realise the full benefits of open banking within their organisation, with 26% saying that although they had realised benefits, there were still opportunities to explore. Almost 1 in 5 (19%) said they had only achieved a small percentage of what is possible.

Respondents thought that the most significant benefits of open banking for organisations were more straightforward reconciliation (33%), improved payer user experience (31%), consolidated reporting (31%), and improved access to loans (30%). For consumers, greater control (41%) was the number one benefit, followed by improved customer experience/convenience (37%) and a reduction in fraud risk (34%).

When questioned about how their customers respond to new payments technology, respondents were almost evenly split, with 49% believing there was interest from the start and 48% adding that their customers were distrustful at first, requiring extensive education before beginning to use new methods. Gaming and gambling companies had the most distrustful customers (63%), with the reverse true for healthcare and retail, catering, and leisure companies, of which 52% said that there was heightened interest from the beginning.

”With the technology’s popularity rising quickly amongst consumers, it’s clear open banking is now an essential option at the checkout. It’s exciting that merchants feel their customers are open to new payment methods. As momentum grows, leading payments providers have the chance to help their clients make the most of the opportunities that the technology offers,” added Hanrahan.

When quizzed about which payment method would present the most opportunities for their organisation over the next 3 years, respondents said open banking was the top choice (36%), followed by digital wallets (35%) and Buy Now Pay Later (BNPL) (26%).

When asked which payment methods had seen an increase in uptake over the last 2 years;

• Around 39% of people said digital wallets.
• Over 35% called out open banking payments.
• When it comes to BNPL 28% of respondents preferred it.
• Other 28% responded chose credit or debit cards.