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Token: Increasing Consumer Stickiness in Open Banking Payments

2021 has been one of the best years on record for the adoption and industry success of open banking. It has completely uprooted what the sector expects from technology, but will its success and popularity be carried through to next year?

Tim Corke, Chief Customer Success and Strategy Officer at Token
Tim Corke

In this exclusive for The Fintech Times, Tim Corke, Chief Customer and Strategy Officer at the open banking payments platform Token, discusses the highlights of the past year for open banking, how it’s being adopted by the consumer, A2A and what we can expect to see emerging from the technology within the coming months.

With over 15 years of experience in payments, Chief Customer and Strategy Officer Corke is a proven, disruptive fintech leader. Prior to joining Token last year, Corke founded and successfully exited eMerit, a market-leading Mobile Payments business, and went on to drive corporate growth for two high-paced public fintech organisations (AIM and NASDAQ): Monitise, and Bottomline Technologies. Corke is also a Mentor at the London Business School’s Institute of Innovation and Entrepreneurship.

As we head into a new year, open banking represents a beacon of light amidst the continued pandemic and Brexit-induced fog of financial uncertainty, enabling an innovative new generation of financial services.

Despite comments by some industry figures, I’d class it a success, given millions of people are now using open banking-enabled products and services. And the range of use cases continues to grow.

If we consider open banking payments, they’re no longer the future – they’re here and growing fast. Juniper Research believes global transactions facilitated by open banking will exceed $116billion in 2026, rising from just under $4billion in 2021. That’s a 2800 per cent increase, with Europe expected to lead the way, accounting for 75 per cent of the total in five years.

A growing wave of adoption

The Open Banking Implementation Entity (OBIE) estimates 7.5 to 8.5 per cent of digitally-enabled UK consumers and small businesses used open banking services by the end of August 2021, an increase from 5 to 6 per cent in December 2020. The OBIE’s research also revealed consumers using open banking-powered apps are keen to continue using them, with 84% interested in expanding their use of similar products and services.

In the UK, open banking API call volumes reached 840 million in October 2021, with successful account-to-account (A2A) payments to the nine largest banks reaching 2.84 million, an increase of 343 per cent from October 2020.

Across the Channel, API call volumes are expected to reach almost 200 million in Germany, 150 million in France, and 130 million in Italy by the end of 2021, pointing to a strong growth trajectory in Europe.

Open banking is a catalyst for the growth of A2A payments

Open banking-enabled A2A payments are therefore thriving, receiving a boost in 2021 when the CMA agreed to mandate Variable Recurring Payments (VRPs) as the mechanism for implementing sweeping.

VRPs will allow customers to securely connect authorised payment providers to their bank account to make recurring payments on the customer’s behalf, within agreed parameters. This is strongly tipped to be another industry game-changer.

We’re now seeing A2A payments funding the new fintech layer. Digital wallet providers, for example, are early adopters of A2A payments, including a growing number of stock and crypto trading wallets. Together with debt repayments, these are currently the fastest-growing use cases. As more consumers become comfortable topping up digital wallets, their adoption of other A2A use cases across other online services is taking off.

While such use cases will tip open banking payments to the mainstream, it’s exceptional customer experiences that will make them stick.

There’s no registration required, nor tedious typing of card numbers or expiry dates with an A2A payment. Instead, consumers authenticate A2A payments in the banking app they use every day, typically with their face or finger. The experience is sleek and secure – with success rates of over 90 per cent, the numbers speak for themselves.

A conversation starter

Given the widespread media coverage it knowingly prompted, Amazon’s announcement that it will stop accepting UK-issued Visa credit cards in 2022 is a clear sign the market may soon be reaching ‘peak card’.

Consequently, as merchants and their PSPs shift from supporting traditional payment methods to A2A payments, consumers should soon expect ‘instant bank payment’ to be part of a typical checkout experience.

Ahead of this, as an industry, we need to speak directly to consumers about where they should expect to use instant bank payments and why they would want to.

Education breeds trust and familiarity, which are key to further consumer adoption. We must also strip away the jargon that open banking is often clouded in. ‘Open’ may inadvertently and incorrectly imply’ ‘insecure’. So while some consumers may be reluctant to try an ‘open’ payment, calling it an ‘instant bank payment’ or ‘account-to account payment’ better reflects its inherent security and ease of use.

What consumers should expect in 2022 and beyond 

Today’s customers don’t care about financial products, rather they’re interested in what these products allow them to do. With open banking payments, that’s making a payment with minimal effort and maximum speed and security.

And open banking payments will allow consumers to do even more within twelve months.

With the UK’s nine largest banks facing a mid-2022 deadline to implement VRPs successfully, consumers will be able to programme rules for their recurring payments, which opens up a swathe of new A2A payment use cases across subscriptions and one-click ecommerce payments. ‘Account on file’ will replace ‘card on file,’ and A2A payments will power one-click commerce.

Consumers will also be able to push a bank payment in a retail environment using a QR code or ‘Pay-by-Link’. Open banking infrastructure is rapidly maturing to the point where we can bring offline payments online. This means consumers can expect to scan a QR code and authenticate an A2A payment on their mobile phone, meaning the experience can rival the seamlessness of contactless card payments or Apple Pay.

Open banking-enabled A2A payments are becoming sticky for consumers – and they’re about to get even stickier. As an industry, we can support this transition by working together to educate and empower people to embrace this brave new world of payments with confidence and a clear understanding of the benefits.


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