Open Banking Transactions Dwarfed by Card Payments in UK

Has open banking lived up to its potential in Great Britain?

So far, not really, the Financial Times (FT) argued in a report Monday (May 26).

The report noted that opening banking has seen success in some areas, like allowing for faster lending decisions. However, the FT added, data from Open Banking Limited showed that open banking powered 27 million payments in the U.K. during March.

At the same time, the U.K.’s Payments Systems Regulator recorded 1.92 billion card transactions in February, the most recent month for which data was available.

Open banking technology lets customers share their financial information with other banks, apps and online retailers. It also allows lenders to permit pay-by-bank remittances by sending information to receiving banks, with no need for card intermediaries like Mastercard and Visa.

The excitement around open banking accompanied the past decade’s U.K. FinTech boom, the FT added, as regulators wanted to promote competition following the financial crisis.

This helped make London a leader in the sector, with the city hosting Europe’s most highly valued startup, Revolut, and one of the most attractive places for FinTech investments, outside the U.S.

However, the report said, U.K. FinTechs have failed to reach profitability, while higher interest rates have cooled investor enthusiasm.

Among the roadblocks to greater open banking adoption is that many users don’t know the technology is available. And those that are aware don’t see a benefit, as digital wallets like Apple Pay have made online card payments even easier.

“The problem is not that open banking doesn’t work,” said Riccardo Tordera-Ricchi, director of policy at the Payments Association. “It’s the fact that [other] payments work very well.”

Recent research by PYMNTS Intelligence and Trustly shows that the awareness gap for open banking isn’t just confined to the U.K., with 56% of American consumers saying they are not familiar with pay by bank.

“However, the research highlights the power of incentives in bridging this gap, demonstrating a 72% increase in interest when consumers are offered cash-back discounts or loyalty benefits,” PYMNTS wrote last month.

“This surge in interest extends even to those who initially express no inclination towards this payment method, indicating a substantial opportunity for providers to sway even skeptical consumers. Furthermore, the study pinpoints Generation Z and high-income individuals as particularly receptive to pay by bank, especially when coupled with incentives. These demographics, along with those already intrigued by the concept, represent the most promising early targets for driving adoption.”