PSPs must prepare to charge full steam ahead with Open Banking payments

As we roll into a New Year, open banking payments are on the agenda of all players across the payments value chain, from banks to payment service providers (PSPs), gateways and acquirers. 

In November 2021, the UK topped three million successful Open Banking payment initiations per month — an eye-opening increase of 309% in just one year. Global payment transactions facilitated by Open Banking will exceed USD 116 billion in 2026, from just under USD 4 billion in 2021, representing a 2800% increase in just five years. Increased consumer awareness will contribute to driving this take-up, with Europe leading the way and expected to account for 75% of the total in 2026. Worldline has even called account-to-account payments a 'megatrend in global payments' and predicts market penetration for account-based payments will reach 10% of all payments over the next five years.

The data demonstrate that Open Banking payments are moving to the mainstream, and merchants have certainly taken note. In both the UK and Europe, increasing numbers of retailers are now adopting A2A payments as they become more familiar with the cost savings, security and speed of settlement on offer. Indeed, merchants regularly send out a request for information (RFI) to PSPs to gauge their capabilities, and this time last year, we were beginning to see more RFI processes with a checkbox: “Do you support Open Banking?” Twelve months later, Open Banking is a standard part of most of these RFIs. 

Whilst Open Banking could have easily disintermediated PSPs, gateways and acquirers, they are now moving en masse to offer Open Banking capabilities. Gateways see Open Banking as an opportunity because they have been squeezed between merchants, schemes and acquirers for so long, which has gradually eroded their margins. The cost-effectiveness of A2A payments compared to cards and other alternatives will help drive a more significant margin for gateways, especially as they build value-added services on top, like reconciliation and reporting. Meanwhile, acquirers seek to add A2A payments to complement their card-acquiring capability.

Given increasing merchant demand, the question is not whether PSPs and others across the network should buy into Open Banking payments but when. Within the next six to eighteen months, Open Banking payments will be everywhere. I would suggest that if a PSP has not already considered supporting Open Banking payments, their merchants will be ready to consume them elsewhere. Now is the time to be having a conversation about Open Banking payments. But what should a PSP look for in a potential provider?

PSPs have merchants everywhere, and merchants have customers everywhere. As PSPs look for the right open payments solution to help them get off the blocks next year, breadth of connectivity is vital. Look for a provider with the broadest coverage to banked customers in key geographies. In Europe, that’s Token, which now offers full open payments coverage in 14 EU countries, representing over 210 million potential end-users of Open Banking services. 

As open payments technology and capabilities evolve, PSPs should also look for a partner at the cutting edge of new functionality. The right open payments partner can help PSPs gain a first-mover advantage by tapping new opportunities faster. 

Finally, PSPs should look for a partner that can offer both open banking and payments industry expertise. At Token, we are “payments people.”  Token’s focus on payments has enabled us to develop deep functionality that makes accepting bank-direct payments elegant and simple. Our team has decades of combined experience in the payments industry, so we have sat where our customers and partners sit. We understand their needs and how their operations need to run, and we stay close to open banking developments. As a result, we blend a depth of payments industry experience with the latest open banking insights to deliver value to our partners at every leg of their open banking journey.

At the outset of the new year, PSPs need to act now to win in a world where open payments are mainstream. The open payments train is leaving the station, and PSPs not onboard could soon find themselves left standing at the platform. And just as the best conductors ensure a smooth journey, now is the right time for PSPs to look for an open banking partner at the cutting edge of new functionality, with the broadest connectivity and deepest payments industry experience, to help them charge full steam ahead.