2024 – what’s on the horizon for payments and data-driven financial services?

8 min read|Published January 02, 2024

From Pay by Bank and VRP, to risk assessments, sustainability and money management tools, 2024 looks set to be the year when data-driven financial services hit the mainstream. Read on for our predictions for the year ahead.

TL;DR – Quick summary
  • We expect both Pay by Bank and variable recurring payments (VRP) to make a big impact in the payments space in 2024.

  • When it comes to lending, data-driven risk assessments are viewed by many lenders as more important than ever due to the wider economic environment.

  • We also anticipate that banks will step up both their financial management support and sustainability tools for consumers.

TL;DR – Quick summary
  • We expect both Pay by Bank and variable recurring payments (VRP) to make a big impact in the payments space in 2024.

  • When it comes to lending, data-driven risk assessments are viewed by many lenders as more important than ever due to the wider economic environment.

  • We also anticipate that banks will step up both their financial management support and sustainability tools for consumers.

The rise of Pay by Bank

Pay by Bank is a truly innovative payment method which we believe will change the way we pay. It gives consumers more choice and lets businesses accept instant, account-to-account payments from anyone with a bank account, in Europe and beyond.

Only two years ago, Pay by Bank availability was limited to fringe use cases in select markets. But now we've reached the point where it's becoming available to merchants everywhere. For example, Adyen, one of the biggest payment platforms in the world, is making it available to all of its UK merchants and rolling it out across Europe. And the number of leading companies across all areas of financial services that now have open banking at the core of their offering is increasing all the time.

Plus, the Pay by Bank user experience is already competitive, and is only going to get better. So we think there is a clear advantage for merchants that are early adopters. By tapping into the demand that already exists for a simple, secure, and streamlined payment experience, merchants can differentiate themselves from the competition in 2024 with Pay by Bank.

Realising the potential of VRP

2024 is the year we can really expect variable recurring payments (VRPs) to realise its full potential. VRPs are a new way to accept recurring payments and transfer funds quickly and securely in the UK, and provide financial control to an end consumer.

From their banking app, consumers have greater visibility of their monthly outgoings with VRPs, as well as better flexibility over when and how often a recurring payment will occur. For example, with VRP, the consumer sets the maximum value on a recurring payment, which allows people to create smart rules to avoid overdraft fees or maximise savings.

In 2024, we will see the growth of commercial VRPs, which solve for fixed or variable recurring payments (beyond personal account transfers), and enable users to review and change, or even cancel any subscription in a few clicks through their bank app, ensuring maximum transparency and control. This is crucial for improving financial health, such as avoiding ‘set and forget’ subscription traps. This will help vulnerable consumers avoid overdraft fees and cancelled payments amid the current economic crisis.

Continuing collaborative development by the financial services industry should ensure that commercial VRP can realise its full potential.

Investments in risk decisioning

Tink anticipates that UK lenders will continue to prioritise investment in affordability checks in 2024. Recent Tink research revealed more people are finding it difficult to qualify for loans, with 58% of lenders surveyed noting a greater number of rejected applications due to people not meeting the affordability criteria.

On top of this, traditional credit checks combined with onerous processes to provide evidence of expenditure and income levels can be time consuming, out of date and end in higher abandonment or rejection rates.

By prioritising investments in data-driven lending models in 2024, lenders can make more informed credit decisions to widen credit access to those who can afford it, while protecting struggling borrowers from getting into financial distress.

These data-driven risk assessment models give financial services providers, with consumer consent, the ability to view transaction data in peoples’ bank accounts. This enables a holistic approach to gathering insights on income and spending behaviours to inform creditworthiness and affordability – increasing financial inclusion and access, while removing unfair barriers to lending encountered by certain consumer cohorts such as those who have irregular income from multiple sources.

An estimated 82% of lenders believe the cost-of-living crisis makes affordability checks more important than ever and 77% acknowledge the need to improve their risk decisioning models to give the most accurate view of people's finances.

Greater demand for sustainability tools

In 2024, we forecast continued demand from consumers to track their environmental impact through a service provided by their bank, highlighting the opportunity for banks to play a bigger role in helping customers on their sustainability journey.

Research conducted by Tink showed that an estimated 40% of people in the UK would like their bank to offer tools to track their environmental impact. But currently just 24% of banks are offering customers tools to help them understand their carbon footprint based on their spending.

Encouragingly, the research showed a further 40% of banks report that they are currently working on delivering this service to their customers. This paves the way in 2024 for a higher number of customers to access the carbon tracking tools they want, and suggests there is an opportunity for banks to do more to make customers aware of these tools as they become available.

For the forward-thinking banks who are already offering carbon tracking tools, now is the time to ramp up consumer engagement to ensure people know how to easily access these tools. Those who do will be in a strong position to deliver on expectations and win loyalty from both existing and new customers.

Continued need for financial management support

In 2024, we expect to see banks ramping up data-driven financial management support, as consumers continue to grapple with the high cost of bills and goods.

Research from Tink estimated that just over a quarter (27%) of UK consumers felt their bank was helping them through the cost-of-living crisis by providing them with tailored financial support, and over a third (37%) would like their bank to do more to help them manage their finances.

Encouragingly, many banks recognise both the responsibility and opportunity in offering data-driven financial services to help consumers manage their finances during this challenging economic time. And the majority of financial institutions are on the front foot and seizing the opportunity to develop and invest in these services.

An estimated 42% of banking executives believe they have a responsibility to help customers through the cost-of-living crisis, and 56% agree there is commercial rationale for doing so. The forward-looking banks currently offering these services are already reaping the benefits. Half (50%) surveyed reveal data-driven financial services have delivered commercial benefits for their business, while 50% also say it has helped them improve customer experience in particular. Almost half (47%) of the respondents agree that data-driven financial services have helped them better support their customers during the cost-of-living crisis.

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