Capturing the US Family Dynamic Will Power Open Banking’s Future

Without education, awareness, or utility, any innovation will find it hard to scale.

Fortunately for open banking, which allows consumers to securely connect to their bank accounts to pay merchants and service providers using their regular online banking credentials, the innovation can draw from its success and killer use cases across both Europe and the U.K. as it looks to make headway in the U.S.

That’s why PYMNTS sat down with Nate Marquiss, head of financial services at Trustly, and Johnson Cook, co-founder and president of Greenlight, to unpack the immense potential for open banking growth in the U.S. market.

One of the significant advantages of open banking is its potential to revolutionize payment systems. Open banking payments, or pay-by-bank methods, offer an alternative to traditional card payments. These payments can be processed in real time, reducing the costs associated with card transactions and eliminating the risk of chargebacks, Marquiss said.

But despite its benefits, open banking is, as of yet, relatively new to the U.S. market.

A recent survey indicated that only 11% of U.S. adults had used open banking payments in the last year, primarily due to a lack of familiarity and understanding of the system. But as awareness and understanding grow, the adoption of open banking is likely to increase, driven by the demand for seamless, instant financial services — particularly from younger generations.

“It’s a new experience. A lot of users are unfamiliar with it,” said Marquiss, stressing the need for education and awareness about the advantages of open banking.

Speaking to the adoption of open banking by younger generations in particular, he said, “They don’t want to seek out their account routing number. They don’t want to get out their checkbook or their wallet or purse, et cetera. They want instant gratification, ease of use, less friction.”

The Advantages of the Open Banking Permissioned-Data Model

Open banking’s benefits rest on its data-sharing model that aims to foster innovation, improve customer experience, and drive financial inclusivity by creating a more competitive and efficient financial ecosystem built on the back of consumer-permissioned data. Already, open banking is having an immediate impact on consumers’ financial lives around the world.

As Greenlight’s Cook explained, his company’s own mission — to empower parents to raise financially savvy children — relies on open banking capabilities.

Greenlight partners with over 75 banks and credit unions to distribute its services, Cook said, noting that this allows families to connect their accounts and manage finances seamlessly. By integrating open banking technology, parents can send money instantly to their children, teach financial literacy and provide a controlled environment for financial education.

This instant access is critical, as children can often need funds quickly and cannot wait for traditional ACH transfers to clear. Open banking technology ensures that these transactions are quick, efficient, and secure.

“It puts financial institutions in position to win that young adult as they mature,” Cook said.

And open banking has numerous applications across various industries. In addition to consumer finance and banking, open banking can significantly impact sectors such as retail, eCommerce and even property management.

Unlocking Open Banking’s Benefits Across Industries

Open banking can transform the retail and eCommerce sectors by providing a low-cost, secure alternative to card payments.

Marquiss said merchants can benefit from reduced transaction fees and the elimination of chargebacks.

“Merchants want three things: a great user experience, which means high conversion; a low-cost alternative to card acceptance, so less fees; and they want lower exposure to non-refutable transactions, so no chargebacks,” he said, adding that consumers want a great user experience too, and one that happens instantly.

Additionally, open banking can facilitate personalized offers and loyalty programs by leveraging consumer spending data, driving higher engagement and customer loyalty.

One of the primary use cases for open banking is bill payment. Consumers can authenticate their bank accounts easily, enabling seamless enrollment and payment of recurring bills. This method offers a cheaper and more efficient alternative to traditional payment methods, enhancing customer satisfaction and meeting 21st century expectations, Marquiss said.

At the same time, he said, embracing open banking can help further streamline the lending process by providing lenders with real-time access to a consumer’s financial data. This access allows for more accurate risk assessments and personalized loan offers, improving the experience for both lenders and borrowers.

Marquiss and Cook emphasized that the potential for upcoming regulatory clarity around open banking in the U.S. will help drive its adoption, providing consumers and businesses with more choices and better financial products.

“We really need financial institutions to be proactive in identifying and reacting to the regulatory changes coming up, and to ensure that they remain compliant with the latest standards and are prepared for what’s coming up next,” said Marquiss. “The rate of change is only speeding up. It’s only getting faster, but we feel like the future is incredibly bright.”