This past year saw data sharing, driven by EU regulation, become the norm and open banking gained real traction in ways that cannot be ignored. It’s not just that more buyers than ever are using it to make more payments – open banking is also now being adopted by major technology and lifestyle brands that will be pivotal in achieving mass adoption.
In this blog, we will look back on the facts, figures, and headlines from 2023 as well as look forward to the open banking opportunities in the coming year.
A look back to 2023: reflections
Triple digit transaction growth
Compare open banking data published in the summer with the previous YTD figures and you’ll see the upward trajectory remains sharp and decisive. Total payments grew over 102% during that 12-month period. In July 2023 alone, the number of active payment users grew over 10% to 4.2m in a month and the number of payments was up over 9% to 11.4 million.
These robust figures are undeniable evidence that buyers are continuing to adopt open banking to manage their finances effectively.
Account to Account (A2A) payments are at the heart of the open banking proposition, creating the interface and front end that links instant payment schemes with digital wallets.
With such impressive growth visible in the figures published earlier this year, we expect the strong upward curve to continue for the rest of 2023 and set the scene for another record-breaking year in 2024!
The big tech factor
Think about the key factors in accelerating mass adoption of the most pivotal payment technologies in recent years. Take, for example, the rise of contactless technology.
The first contactless cards in the UK were issued by Barclaycard in September 2007. The technology had proven itself and then found its perfect launchpad for mass adoption when Transport for London (TfL) integrated it into its card payment technology in 2014. Travellers could now conveniently tap in and out of a station instead of incurring the inconvenience of purchasing paper tickets.
It was the same year that Apple announced the launch of Apple Pay. Contactless technology had been in the UK for seven years before being catapulted into mass consciousness by TfL. It is interesting to note that open banking has been available since 2018 so celebrates its sixth birthday in 2024. Like contactless payments, open banking has long-since proven itself as a concept and demonstrated consumer adoption.
Over this past year, we have also now seen big tech companies with hundreds of millions of users announce the integration of open banking into their platforms. Such companies will be ruthless in their assessment of new technologies and be confident there is a largely untapped public appetite before making what is likely to be a huge investment in its integration into their platform.
AliPay+ super app adoption
Earlier this year, AliPay+, the Chinese super app that already includes payment and digital wallet functionality, announced a decisive step forward into open banking and the European market.
Through a newly announced relationship with Yapily’s open banking infrastructure platform, AliPay+ will explore the application of open banking on mobile payment platforms to deliver even more convenient and secure payment options for millions of European consumers, in addition to the 1.4 billion consumer accounts it already provides across Asia.
The agreement with Yapily means that consumers who bank with European financial institutions will be able to make cross-border payments to Alipay+ merchants across the world. Payments will be made directly from account to account (A2A) smoothly, securely and instantly.
Through API technology, customers will also be able to see their account balance including credit cards from supported banks as well as their transaction history.
Alipay+ in partnership with Yapily is exploring the application of open banking on mobile payment platforms to deliver an even more convenient and secure payment option for millions of European consumers, in addition to the 1.4 billion consumer accounts across Asia. Consumers who bank with European financial institutions will be able to make cross-border payments to Alipay+ merchants across the world directly from their bank accounts with smooth payment experience and security.
Apple Pay upgrades with open banking
Apple also announced it is using open banking data to develop its financial services and customer convenience this year.
Its iOS developer beta reveals the functionality of the new iPhone wallet will show UK customers their account balances of supported banks, including credit cards – as well as transaction history all in one place. Reports also indicate that customers will also be able to see their balances when buying online using Apple Pay so they can make responsible buying decisions.
A look ahead to 2024: predictions and trends
VRPs - the non-sweeping game-changer
The sweeping form of Variable Recurring Payments (VRPs) continued to gain traction over the past year. However, the industry is looking forward to the non-sweeping (or commercial) variety in 2024 which will be a huge driver of open banking growth and opportunity.
In a nutshell, sweeping VRPs enables your customers to move money between accounts they own. It is perfect for managing finances, avoiding late payment fees, and getting the most from savings rates. But non-sweeping VRPs allow your customers to buy things using different varieties of recurring payment that expose Direct Debits and Standing Orders as dusty relics of the past.
Learn more about VRPs in our handy blog.
With growing use comes the need for standards
Two important regulatory factors are currently at work – and both are working towards supporting the growth of open banking.
Firstly, there is general concern that certain US card schemes are too dominant in Europe and are infringing on the jurisdiction of the local authorities. This will further fuel the shift away from the traditional model of the payments industry to encouraging more competition, greater choice and lower costs for accepting payments.
The other regulatory change on the horizon will be delivered by PSD3. Its predecessor PSD2 was the ground-breaking directive that mandated that banks must enable access to customer data using APIs (Application Programming Interfaces) when requested by third-party providers (TPPs) with customer consent.
It opened the door to the concept and then the reality of open banking.
PSD3 will once again change the way PSPs and PISPs operate, mandating the need to adapt and creating new opportunities. There are a number of areas that we expect the new regulation to focus on. Improving API performance and removing friction in user flows to drive up conversion and greater adoption of open banking services is likely to be a focus. Consumer rights are likely to be improved, as well as fraud mitigation measures.
PSD3 is also likely to enhance enforcement and implementation of the directive in Member States, including addressing concerns related to API standards and SCA, which have been deemed insufficient by many in the industry to date.
Get all the insights you need for the upcoming PSD3 initiative here.
2024 looks to be an eventful year for Open Banking
For the past few years, we have welcomed fresh data that shows the continuing growth of open banking adoption – but 2024 looks to be different.
When the likes of AliPay+ and Apple both embrace open banking as a way to grow their business, many other businesses will also take the opportunity seriously. These tech giants have achieved huge success by delivering products, services and convenience that are consistently ahead of future trends and emerging technologies.
They successfully anticipate customer needs, and they don’t take risks lightly.
New regulations that will come in as part of PSD3 will refine open banking still further to create an even better buyer experience and enhance buyer protection.
So whether you are considering your first steps into open banking or have already adopted it, you can rest assured that you are in good company. As well as being chosen by AliPay to enhance its financial services, Yapily is helping hundreds of other organisations to add new low-cost payment options to their checkout or bring new financial services to market - all powered by open banking.
Make sure your business stays ahead of the competition and can ride the wave of open banking trends. Speak to one of our experts today and let’s help get you ready for 2024.
