Adoption of open banking in Europe

By James Hickman, CCO of Ecospend

In the rapidly evolving world of payments, Open Banking is emerging as a transformative force, reshaping the payments landscape in both the UK and Europe. The surge in card spending, reaching an unprecedented £76 billion in July 2023, shows the rapid growth in the payments industry, and is a huge opportunity for companies looking to enhance payment efficiency.

Across Europe, Open Banking is breaking down traditional barriers and ushering in a new era of accessibility, competition, and customer-centric experiences. Simple and efficient, Open Banking payment methods such as Pay by Bank challenge traditional payment methods and set the stage for a more agile and interconnected financial future.

UK leads the way in payment innovation

The UK is a leading hub for innovation when it comes to payments. According to the Open Banking Impact Report, over 1 in 9 (11%) British consumers have become active users of Open Banking, up from around 7% in December 2021.

Small businesses are adopting the technology too, with a record high of 17% active users. In fact, the Open Banking Impact report found that the first six months of 2023 saw double the volume of payments compared with the first six months of 2022. 9.7m payments were made in June 2023, an increase of 88% on the same month in 2022.

We only expect this number to grow as companies seek to replicate those who have successfully adopted, and reaped the benefits of, Open Banking services. The case for adoption is a strong one for businesses and customers alike.

Why Open Banking improves the payment journey

Pay by Bank is an account-to-account payment solution, which uses Open Banking payment initiation services (PIS) to allow consumers to pay merchants directly from their bank accounts. When a customer chooses to pay via Pay by Bank, they are instantly directed to their chosen bank account and do not have to manually input card details. As a result, it has a range of benefits for both consumers and businesses.

For example, unlike traditional card payments, Open Banking transactions eliminate the need for entering card numbers, expiration dates, and CVV codes, simplifying the user experience but also reducing the risk of sensitive information falling into the wrong hands.

For refunds, the money can be returned directly to the customer’s account without the need for in-person verification, enhancing customer satisfaction and increasing customer loyalty.

As well as dramatically improving the customer experience, Pay by Bank is also a truly sustainable way of paying, reducing the risk of customer indebtedness created by ‘buy now pay later’ and other credit-based payment processes. By only allowing customers to pay with money they already have, account-to-account payments encourage and promote responsible banking.

A scalable solution

Open Banking has significant growth potential. Traditionally, cross-border payments are slow, costly and cumbersome. With Pay by Bank, businesses can enjoy instant money transfers across borders and currencies. The likes of Trustly, a leader in Open Banking, exemplify how this technology can simplify cross-border transactions, serving thousands of merchants across multiple markets.

The momentum of Open Banking shows no signs of slowing down either. In Europe, the market was valued at $6.1 billion in 2020, with projections estimating it to reach $48.3 billion by 2030. The impending Payment Services Directive 3 (PSD3) in 2024 is set to further amplify Open Banking’s reach, introducing new rules and standards to enhance features like emergency data access, consent management, and data access interfaces.

Businesses who embrace these opportunities will expand their services, reach new markets, and become more efficient, while those who neglect Open Banking risk losing customers to more agile financial solutions. The future belongs to those who embrace the Open Banking revolution, navigating the changing payments landscape with innovation and adaptability.