The top 3 trends driving open banking payments adoption today

6 min read|Published August 24, 2022

In our latest report, ‘The future of payments is open’, we asked financial executives across Europe for their thoughts on open banking’s potential to reshape the payments industry. Here’s what they see as the key adoption drivers for open banking powered payments going forward.

TL;DR – Quick summary

In our latest research report, we asked the survey respondents to identify the biggest drivers for adopting open banking powered payments.
The top 3 drivers for adopting open banking payments are real-time payments, the ability to pay directly from any bank account, and secure payment flows.
Our research makes it clear that there are major tailwinds behind the growing adoption of open banking payments.

TL;DR – Quick summary

In our latest research report, we asked the survey respondents to identify the biggest drivers for adopting open banking powered payments.
The top 3 drivers for adopting open banking payments are real-time payments, the ability to pay directly from any bank account, and secure payment flows.
Our research makes it clear that there are major tailwinds behind the growing adoption of open banking payments.

Every year we ask YouGov to conduct a survey with financial executives across 12 European countries. Now in its fourth edition, this year we asked them specifically about the key drivers enabling the full-scale adoption of open banking payments. It all comes down to speed, coverage, and security.

Base: All respondents (n=380)
Source: Tink, 2020

Real-time payments are a game-changer

According to our survey, the key driver behind the growing popularity of payment initiation services (PIS) is the ability for merchants to benefit from real-time payments. This is perhaps unsurprising – instant payment rails enable merchants to immediately verify that a payment has been executed, since by default there’s no third party (like a card scheme) guaranteeing payment execution.

In the UK, where the Faster Payments System has seen strong adoption, real-time payments are already a reality. This is a success story that the rest of Europe would do well to follow. Adoption of the SEPA Instant Credit Transfer scheme (SCT Inst), an equivalent pan-European scheme, was initially fairly patchy though this is changing fast.

Since its inception, payment initiation has always provided an instant, real-time payment experience for end-users in Europe. But once the payment is initiated, in some cases (particularly outside the UK) merchants would then need to wait up to one business day for the funds to be settled.

Tink customers using our settlement accounts feature receive an instant confirmation of payment execution – even before the funds are deposited in the merchant’s bank account. The combination of fast, cost-effective, and essentially fraud-free payments, plus instant settlement, could be a game-changer for merchants in several industries. Especially those industries in which speed and convenience matter most like ecommerce, travel, and financial services.

Hopes for a truly universal payment method

Another key driver according to financial executives is the ability to pay from any bank account. This is a fundamental benefit of open banking over other payment methods: a user can pay from their existing bank account without having to sign up for any other payment service. The same account they already use in everyday life can also be used for PIS.

Ultimately this means that merchants can accept payments from the largest possible audience, unlike other alternative payment methods which cover smaller segments of their audience. This becomes extremely beneficial if you’re looking to do business across several European countries and would otherwise have to integrate and manage multiple local payment methods, like iDEAL in the Netherlands or Multibanco in Portugal, for instance.

The other key aspect here is that, with PIS, users authenticate directly with their bank – an institution they’re familiar with and trust above almost any other – and they are already familiar with their bank’s customer interface, which they use to confirm the payment. So the ability to pay from any bank account is also a big plus for conversion rates too.

Fighting fraud, and winning

Higher security and fraud prevention were cited by financial executives as the top benefits of open banking payments, so it’s little surprise that security is seen as a key driver too. Especially considering that online payment fraud has risen sharply over the last decade, leading to higher costs for merchants.

PIS is fundamentally one of the most secure payment methods available. Strong Customer Authentication (SCA) is always enforced, meaning a user has to be present to authenticate with their bank (via fingerprint or Face ID, for example) when the payment is initiated. This virtually eliminates the threat of fraud, a key cost driver for merchants, while chargebacks and disputes are also less of a concern.

A second key aspect is that, unlike with some traditional payment methods like cards, neither the user’s login credentials nor account details are shared with the merchant (or anyone else, for that matter). This reduces the risk of data breaches for the merchant and also removes the need for costly compliance protocols like PCI DSS.

Our research makes it clear that there are major tailwinds helping to drive adoption of open banking payments. The growing prevalence of real-time payment schemes is enabling truly instant bank payments across Europe, and since the only barrier to entry is having your own bank account, the sky really is the limit in terms of consumer adoption. Add to that the benefit of drastically reduced fraud, at a time when online card fraud is rising year-on-year, and it’s easy to see why PIS is growing in popularity among merchants.

To learn more about the benefits and drivers of open banking powered payments as seen by financial executives, plus its limitations, download our latest report below.

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