Accelerating Open Banking Adoption Will Drive Real-Time Payments Growth

Open banking has reached new heights — and financial institutions must keep up with this growing technology in satisfy consumer need for real-time payments.

Open banking and instant payments are two of the most exciting trends in digital banking today. Both of these services improve the financial lifestyles of consumers and businesses. While instant payments’ benefits for end users are obvious, open banking is slightly more esoteric. Open banking helps technology providers directly connect with user banks, improving their experiences. It does so by using open application programming interfaces (APIs) that enable third-party developers to build applications and services around financial institutions (FIs).58: Number of countries introducing open banking protocols based on PSD2 or similar legislation

Leveraging financial APIs via open banking could unlock the next step in instant payments’ evolution. It allows real-time payment providers to interface with any customer bank and offers real-time transactions directly from accounts. Although just one-quarter of banking APIs are publicly accessible, banks are increasing API access to nearly 50% in the next three years.

The “Real-Time Payments Tracker®” examines how open banking can accelerate real-time payments implementation. It also looks at how open banking regulations in the United States and Europe affect their real-time payments.

Around the Real-Time Payments Space

Although customers approve of instant disbursements overall, consumers still have lingering concerns that these payments are less secure. A recent study found that 36% of consumers did not want to share their card information for push payments. Thirty-three percent did not want to share their bank account information due to fraud leak fears.

30%: Portion of open banking users who leverage the technology for digital payments

A recent study found that 16% of small to midsized businesses (SMBs) in the United Kingdom now leverage open banking services, surpassing the consumer penetration of 11% for the first time. Experts project this gap will widen with open bankings’ continued usage, which reached 68.2 million in 2022. The study also found there are now 159 fully regulated firms with live open banking-enabled products in the U.K. This number is also expected to increase in the coming years.

For more on these and other stories, visit the Tracker’s News and Trends section.

An Insider on Accelerating Open Banking for Real-Time Payments

Open banking could be a massive enabler for real-time payment solutions worldwide. This proliferation is not equal worldwide, with the United States, in particular, lagging behind the European Union and many other countries.

To get the Insider POV, PYMNTS interviewed Anil Mahalaha, head of solutions at Akoya, about why open banking proliferation in the U.S. will require a concerted effort between the industry and policymakers.

How Open Banking Drives Instant Payment Implementations

$57B: Value of open banking payments globally in 2023

Instant payments are quickly growing in popularity in the U.S. and abroad. Still, in many cases, the need to interface with customers’ preferred FIs has hampered this growth. Open banking can allow instant payment providers to connect with any bank’s API and meet customers where they are.

This month, PYMNTS examines how open banking can accelerate real-time payments implementation and how the regulatory environment enabling these implementations varies significantly on either side of the Atlantic.

About the Tracker

The “Real-Time Payments Tracker®,” a collaboration with The Clearing House, examines how open banking can accelerate real-time payments implementation and how open banking regulations in the U.S. and Europe affect real-time payments in these regions.