July saw a surge in open banking technology usage in the UK, with over 11.4 million payments processed – a 9.3 per cent increase in total payments compared with the previous month.
Comparing data for 2023 against 2022, Open Banking Limited (OBL), the entity set up by the Competition and Markets Authority (CMA) in 2016 to deliver open banking, reveals that total payments have doubled, showing an impressive 102.4 per cent growth.
In July 2023, the number of active payment users surged to 4.2 million, a 10.5 per cent rise from June 2023 and up 68.2 per cent on July 2022.
A major factor driving this growth is the increase in single domestic payments, totaling 10.5 million transactions in July. This reflects an eight per cent rise compared to June. Notable contributors to this surge include pivotal occurrences such as the implementation of government payment solutions and the inclusion of prominent UK financial institutions and investment platforms.
These establishments have unveiled ‘pay by bank’ choices, enabling users to effortlessly finance a diverse range of savings and investment products.
Top three open banking transaction use cases, listed according to their volume:
- Account top-ups: Users embraced the option to top up their e-money transactional or current accounts, as well as savings and investment (S&I) products. This demonstrates the convenience and efficiency that open banking brings to managing personal finances.
- Credit card bill payments: Open banking streamlined the process of settling credit card bills, offering users a seamless way to make payments towards their credit card balances and simplify their financial management.
- E-commerce: Open banking’s impact on online shopping, especially in e-commerce, is notable. Vendors, in particular, benefit from cost savings on card transaction fees. While currently more prevalent in e-commerce, this payment option lets vendors confirm receipt of funds before releasing goods, enhancing financial security and potentially transforming vendor strategies.
Impact of open banking
Variable recurring payments (VRPs) also saw significant growth, with 872,000 transactions in July, representing a notable 28.7 per cent increase on the previous month. All-time data shows that single domestic payments have now reached 163.2 million.
“As open banking continues to redefine the way people manage their finances, the doubling of total payments in just one a year is a remarkable achievement and testament to the transformative impact of open banking,” said Marion King, chair and trustee of Open Banking Limited, said: “The strong and sustained growth in open banking payments underscores the rapid pace at which open banking is reshaping the financial and payments landscape.”
For Siamac Rezaiezadeh, VP product marketing and insights at GoCardless, open banking has a lot of room to grow, and the expansion of VRP should be a starting point.
“Eleven million open banking payments in one month is a fantastic milestone, and it clearly shows the appetite from both consumers and businesses to send and receive payments in this way,” said Rezaiezadeh. “At the same time the use cases, while growing, are still largely based on account top ups, credit card payments and a smattering of other examples.
“When you compare this to the billions of payments each year that go through direct debit and card systems, it’s obvious that open banking payments have a lot of room to grow. There are many levers to pull, but one starting point could be the expansion of VRP into more commercial use cases such as utilities, government payments and other financial services such as insurance. Then the numbers would really start to skyrocket.”
