Why Open Banking payments have reached a tipping point

Open Banking payments making tremendous strides in the UK and Europe

In the three years since Open Banking became a regulatory requirement in the UK, API call volume has increased from 66.8 million in 2018 to 5.8 billion in 2020. Almost 4 million UK consumers and businesses now use Open Banking-enabled products, which has caused the number of total payments to grow by over a thousand percent since 2018, and as of June 2021, Token has captured 37% of all market growth in the UK for open payments year-to-date (Market share is derived from the latest transaction volumes reported by the CMA9 banks). And while account to account (A2A) payments have already travelled a long way in the UK, and are making tremendous strides in Europe, what really excites me is that the momentum that’s propelling them to the mainstream is now simply unstoppable. 

I’ve been closely involved in a journey similar to this before. Some 15 years ago, I worked at the forefront of Mobile Point of Sale (now mPOS), creating solutions to enable embryonic smartphones and other smart devices to act as a ‘cash register’ for merchants receiving card payments on the go. When payments started going to mobile, it was a challenging journey. Technology providers were battling a quadrant of issues: The speed of mobile technology evolution, longstanding traditional merchant behaviour, very traditional banking environments and technologies, a massive swing in consumer behaviour, and a willingness to adopt both mobile and banking.

Fast forward to today’s environment with A2A payments, and mobile technology itself is no longer an issue. Merchants are infinitely further ahead in their technological practices and their approach to the market. In addition, while they’re still maturing, banking platforms are mandated to be easier to work with, which is a position we’ve never been in before in a technology-led environment. Critically, consumers are also driving the need for a better mobile and banking experience, so their adoption is now generally quicker and broader. In short, when I look at all those factors put together, I simply can’t see how Open Banking payments can fail.

The fastest-growing use cases for A2A payments

It’s no secret that cards and wallets have historically dominated payments. However, history also tells us that technology is often the driving force of change. Token is a technical service provider that does the heavy lifting of thousands of Open Banking API integrations. We provide our technology and services to large financial institutions, PSPs, and merchants, who use Token as the core infrastructure for their Open Banking payments propositions. Our customers come to us to connect once, through a single API and platform, and benefit from all the work we’ve done historically (and continue to do today).

As a platform within a platform, Token is generally behind the scenes. From this vantage point, I observe firsthand the fast-growing use cases that are pushing Open Banking payments towards a tipping point, such as the explosion of fintechs demanding Open Banking access. For example, consider consumers using challenger banks, wallets, or trading stocks and crypto-assets. All of these activities start with a consumer loading funds into an account or wallet. At Token, we believe that, in the future, the primary method for doing so will be with an Open Banking A2A payment.

Another fast-growing use case for A2A payments is debt repayments, which I believe demonstrates that consumers have an appetite for the security and familiarity of A2A in this context. At a human level, debt is often very sensitive. In this context, a clear and familiar user experience that consumers can trust creates a willingness to operate differently and with ease. This particular use case also points to an obvious leading model for A2A payments, where the end-user experience is terrific, and the average transaction value is comparatively high. With a high ticket value, the savings and benefits for a merchant are apparent. 

Additionally, there is ecommerce more broadly. Ultimately, A2A payments make checkout experiences more positive. There's no training or onboarding of users. Consumers simply initiate and authenticate ecommerce payments in the banking app they’re probably already using almost daily and at a fraction of the cost for corporates.

There’s a huge cause for optimism regarding A2A payments and a strong sense that the momentum will continue to build in line with use cases and consumer appetite. The fact that a single API makes it easy and fast to embed bank transfers within a purchase removes friction for consumers, delights merchants and service providers, and presents a credible challenge to the dominance of cards.

About Tim Corke

With over 15 years of experience in payments, Chief Customer and Strategy Officer Tim Corke is a proven, disruptive fintech leader. Before joining Token in 2020, Tim founded and successfully exited eMerit, a market-leading Mobile Payments business, and drove corporate growth for two high-paced public fintech organisations (AIM and NASDAQ): Monitise and Bottomline Technologies. Tim is also a Mentor at the London Business School's Institute of Innovation and Entrepreneurship.

About Token

Since 2016, Token has pioneered innovation in payment initiation and data aggregation technology in Europe. Today, with operations in London, San Francisco, and Berlin, Token is driving the shift from traditional payment methods to account-to-account (A2A) bank payments with best-in-class, Pan-European bank connectivity, data, and compliance capabilities. With Token’s complete toolkit, merchants, PSPs, and banks create new capabilities and revenue streams.