Partnerships, Investment and Increased Consumer Awareness To Drive Open Banking Adoption

The benefits of open banking payments have been outlined in a new report from Tink, which indicated that financial institutions across Europe are continuing to bet big on the technology.

According to three-quarters of respondents to Tink’s B2B open banking payments report, increased payment security and fraud mitigation are the two main benefits associated with open banking payments; while the ability to deliver instant transfers and the potential to reduce costs for merchants are also seen as important advantages.

This enthusiasm builds on positive sentiment from 2021 — when Tink’s research showed that 72 per cent of executives considered payments as the most important area of open banking to invest in.

This year, the survey reveals the specific use cases executives believe are best suited to open banking payment initiation services (PIS), focusing on processes that are often inconvenient, frustrating, and time-consuming for the user.

Ranking of use cases PIS are best suited to:

  1. Peer-to-peer (P2P) transfers
  2. Invoice/bill payments
  3. Fund transfers for investments and savings
  4. Online commerce payments

Barriers to adoption remain

Tink has brought to light the work that’s still required to ensure that the full potential of open banking payments is realised. In accordance with this, one of the major barriers to be cited by the respondents was a lack of consumer awareness, with three-quarters of respondents believing it to be critical in the adoption of open banking payments.

Another concern is the currently limited adoption of instant payment rails across Europe to enable real-time payments, which topped the poll of major barriers to the take-up of PIS.

Tom Pope, head of payments and platforms at TinkTom Pope, head of payments and platforms at Tink
Tom Pope

“Open banking has the potential to transform the payments industry. In certain markets, we are already reaching a tipping point of user adoption, where financial institutions are embracing the opportunity and investing in a range of use cases. As a result, PIS volumes are growing rapidly,” explains Tom Pope, head of payments and platforms at Tink.

“But there is still some way to go to remove barriers to mass-market adoption. That’s why we welcome the European Commission’s proposal to mandate the adoption of instant payment rails and call on them to ensure that access to these rails is free for consumers.

“This move will ensure we have the infrastructure in place to continue to innovate whilst encouraging consumer uptake of open banking payments.

“Our research also shows the need for a solid foundation of consumer trust and awareness to allow PIS to reach its full potential. As an industry, we need to work together to create a common language around PIS so consumers can easily understand the service and its benefits.”

Innovative partnerships

In order for the potential of open banking payments to be fully unlocked, increased investment from financial institutions is required on a long-term basis.

Tink emphasises how fintechs have a vital role to play here and can assist financial institutions with enhancing their user experience, pioneering new use cases and establishing business models that facilitate stakeholders to generate value from PIS too.

Pope continues: “Forging strategic partnerships with fintechs can help financial institutions innovate around APIs to remove friction and improve the end-user experience. This is essential to driving mass-market consumer adoption of open banking payments over the next few years.”

  • Tyler is a Fintech Junior Journalist with specific interests in Online Banking and emerging AI technologies. He began his career writing with a plethora of national and international publications.