The UK has been a leader in the open banking space since its official launch in 2018. Its adoption has steadily increased since then to the point where one in five (21 per cent) of Brits are now making regular payments using the technology according to Moneyhub, the open banking paytech.
The Moneyhub research was conducted by Censuswide among 2000 nationally representative consumers. It shows that while cards remain the dominant payment method of choice, alternatives are being looked at. Open banking payments are one of these alternatives.
They enable users to make a payment directly through their phone’s banking app or online banking account. As a result, consumers can make faster, more cost-effective payments – especially when compared to standing orders, direct debits or card payments.
Payment preferences
In fact, according to Moneyhub’s research, open banking payments achieved a milestone earlier this year, hitting 11.78 million transactions in September. This was following a surge of active payment users (68.2 per cent) in July 2023 compared to the same month the previous year.
| Payment type | Percent of Brits using | Percent of 16-24-year-olds | Percent of 25-34-year-olds |
| Direct debit | 70 per cent | 47 per cent | 63 per cent |
| Through a phone with open banking | 21 per cent | 29 per cent | 27 per cent |
| Through the website | 21 per cent | 21 per cent | 22 per cent |
| Standing order | 18 per cent | 11 per cent | 15 per cent |
| Payment on the phone | 10 per cent | 14 per cent | 14 per cent |
| With a cheque | Two per cent | Three per cent | One per cent |
High acquiring costs and settlement delays impact cash flow. This in turn triggers a need for alternative payments As more users become aware of the use cases of open banking’s variable recurring payments, such as regular bill payments, traditional forms of payment like direct debit (which currently sees 70 per cent of Brits using it) will fall to the wayside.
Mark Munson, MD of Moneyhub’s payment division comments: “The world of payments is constantly evolving, and the smart payment revolution that open banking enables is set to shake up how we manage our regular bill payments. Fifty years ago we would have seen payment by cheques or cash as the predominant tool to pay for bills, then direct debits and standing orders grew into popularity.”
Replacing traditional ‘alternative’ payments
As standing orders and direct debits replaced cheques and cash, it appears they are now being replaced by open banking tech. While website payments (21 per cent) and open banking payments (21 per cent) are used by the same amount of Brits, specific age ranges show a trend of adoption of the latter.
According to the Moneyhub research, 29 per cent of 16-24 year olds are using open banking payments compared to just 21 per cent using website payments, and 11 per cent using standing orders. The next age bracket shows a similar trend too. 25-34-year-olds also prefer open banking payments (27 per cent) to standing orders(15 per cent) and website payments (22 per cent).
Interestingly, close to half of those surveyed classed themselves as full-time students (44 per cent) and use open banking to make regular bill payments. However, this trend was not continued by the elder generations as just 13 per cent of those aged over 55 years old use open banking payments.
“Open banking offers greater flexibility, and quicker, more efficient and largely more cost-effective payments for both the merchant and customer. A new generation of consumers is embracing open banking payments.
“With new, innovative and more flexible propositions coming to market, open banking has demonstrated that early adopters of those services, not only demand a greater choice in what they are buying, but how they are buying it. They are not wedded to payment solutions from previous generations.”
