What can we expect of Open Banking in H2 2022?

We’re more than four years on from the ‘birth’ of Open Banking. So what can we expect ahead and how has it changed the payments landscape so far?

Back in 2018, the legislation that powered the start of Open Banking (aka PSD2) came into effect in the UK and Europe.

Since its introduction, the open banking ecosystem has enabled customers and SMEs to share their current account information securely with third party providers.

They in turn can now use that data to customise their apps and services to peoples’ specific financial circumstances.

The goal of Open Banking was clear. It should drive improved collaboration between financial services providers, greater innovation and better products and services for customers.

What it means in practice is that banks and financial institutions are now being challenged to innovate and transform.

They are expected to make the banking experience intuitive and seamless via new products and services that are personalised and data driven.

Many banks are successfully advancing their digital transformation agenda in the Open Banking world by leveraging third-party applications and service ecosystems enabled by APIs.

In the UK, the Open Banking Implementation Entity (OBIE) mandated variable recurring payments (VRPs) in July this year. (VRPs let customers safely connect authorised payments providers to their bank account so that they can make payments on the customer's behalf.)

So, it seems that Open Banking payments are firmly on the agenda for H2 2022.

Charlotte Crosswell, OBIE Chair, said: “The progress made by the entire industry during the past four years to make Open Banking in the UK a success has been astounding. We have set a high standard in the UK, inspiring many other markets to follow our lead.”

Greater consumer awareness, they say, will contribute even more to driving this take-up. So far, Europe is leading the way and is expected to account for 75% of the global total in 2026.

But, security and privacy concerns do still remain a block to faster adoption.

Mambu, the German SAAS banking platform which has over 230 banks and financial institutions as customer, has carried out a new study.

This revealed that more than half (52%) of consumers have never heard of Open Banking, in spite of 80% of respondents using one or more mobile finance apps.

“The research reveals that the majority of customers don’t understand what Open Banking is. Nor how it works and what it means for them,” said Elliott Limb, Mambu’s Chief Customer Officer.

“But it also reveals they do care about receiving better financial services that support their lifestyles – smart banking. If banks address this need and lack of understanding, it will help banks build customer loyalty and provide genuinely innovative, differentiating revenue-generating services.”

To negate this, banks and Fintechs must educate consumers on the ways in which Open Banking can improve how they organise and take control of their finances, be it monitoring spending or making better saving and investing decisions.

Despite this, the advance of Open Banking is clearly at a tipping point. Research by Accenture finds that 76% of banks globally expect customer adoption and Open Banking API usage to increase by 50% or more in the next three to five years.

This is backed by new figures from Juniper Research. It predicts that global payment transactions facilitated by Open Banking will exceed $116 billion in 2026, from just under $4 billion in 2021 — a 2,800% increase in five years.