How Open Banking is revolutionising payments - insights from Amex

Tuesday 14 December 2021 10:59 CET | Editor: Irina Ionescu | Interview

Dan Edelman, VP & UK General Manager American Express: 'Open Banking technology unlocks a wealth of new opportunities to innovate the way payments are made'

How did Open Banking evolve in the UK during the last year? 

2021 is the year that has seen Open Banking edge towards becoming mainstream in the UK. The pandemic has unlocked an appetite to try out new payment methods online. This was seen most notably with the rise of the humble QR code, which was used by the hospitality industry to facilitate everything from viewing menus to payment for food orders. 

Our research found that 20% of consumers reported that the pandemic has changed the way they think about how they pay for products and services with 41% stating they have already used an Open Banking payment or would be open to doing so in the next 12 months (data is based on a YouGov survey of a nationally representative sample of 1,013 UK consumers who use online banking. The fieldwork was conducted in January 2021). 

Many UK businesses have adopted a ‘digital first’ model, seeking to implement frictionless but secure payment solutions - providing a boost to the popularity of Open Banking payments. We’ve also seen a significant uptick in the number of vendors adopting American Express’s Pay with Bank transfer which is powered by Open Banking technology.

How is Open Banking revolutionising payments and accelerating the growth of new payment forms?

Since the Open Banking legislation was introduced, financial services companies have been busy innovating, testing, and laying a strong foundation for a better payments experience. Much in the way that contactless cards took years to become mainstream, we expect to see a similar evolution for Open Banking payments. 

The COVID-19 pandemic has accelerated consumer behaviour change and this, combined with major players rolling out the technology, will speed up the adoption of new payment forms. There’s a huge amount of potential for growth in the coming years, so it’s a journey we’re excited to be a part of.

Which sectors of the industry stand to benefit the most from Open Banking payments?

Open Banking payments are secure, simple, and fast - so the benefits aren’t specific to one industry, they’re helpful to any business looking to streamline its payment processes. 

But, saying that, there are instances where we know they can be particularly helpful - such as payments where a lot of additional information or lengthy reference numbers are required. Open Banking technology can allow businesses to send a payment link or QR code with all the correct information pre-embedded to the individual, eliminating any chance of information entry error or lengthy administrative time linking payment with customers.

Similarly, the technology can be beneficial when dealing with large payments, such as flights or university fees, to provide peace of mind to the payee that they’re not at risk of mistyping key information when making the payment. 

How does Amex benefit from Open Banking opportunities and offer new solutions for the way consumers want to pay?

Open Banking technology unlocks a wealth of new opportunities to innovate the way payments are made. Despite the scope for innovation, friction remains a sticking point – 78% of those we asked said they’ve experienced not being able to complete an online payment (as per the YouGov survey previously mentioned). 

The reason we developed Pay with Bank transfer was simple - to offer a speedy, secure way to pay for goods or services via a bank account transfer, regardless of whether the buyer is an American Express Cardmember or not. Leveraging Open Banking technology, Pay with Bank transfer also enables merchants to receive instant payments from all major UK banks’ current account holders, which in turn helps businesses to keep a handle on their cash flow.

We see the potential for growth in this space, so this is going to be a key area for innovation for American Express moving forward.

What are your predictions for Open Banking moving forward?

We expect to see the growth of products powered by Open Banking develop over the next few years as adoption becomes more mainstream. 

For example, we expect to see an increase in the uptake of digital invoicing. The rise of paperless, digital solutions helps businesses to be more efficient and can positively impact cash flow by reducing processing times. It’s an area for sizeable growth as policymakers in the European Union are set to roll out electronic taxation systems, driven by the need for improved tax collection and a better ability to tackle fraud through more granular, frequent transaction data. In the UK, the Public Procurement Regulations 2019 are also helping to drive digital invoicing adoption.

Only about 40% (SAP Whitepaper – The Essential Guide to Managing Invoices 2018) of businesses are currently using digital invoices but with digitalisation set to be the new normal, we expect the prevalence of digital invoicing to go from strength to strength in the coming months.

This article was originally published in The Paypers’ Open Banking Report 2021.

About Dan Edelman

Dan leads the UK Merchants Services Business for American Express. He is responsible for end-to-end management of merchants in the UK and signing up new merchants to grow coverage. He is also charged with leading and driving the growth of Pay with Bank transfer, the Open Banking-enabled payment solution, in the UK.

About American Express

American Express is a globally integrated payments company, providing customers with access to products, insights and experiences that enrich lives and build business success.

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Keywords: online banking, American Express, Open Banking, digital banking, digitalisation, payment methods
Categories: Payments & Commerce
Countries: World
This article is part of category

Payments & Commerce