The Benefits of Open Banking for Consumers
More and more consumers are taking advantage of the many powerful benefits of Open Banking.
Financial Services is rapidly growing as a sector which is no surprise - it is one of the largest industries in the world. Billions of people hop online to shop, book services and manage their finances, so financial products are in the spotlight more than ever before – particularly with the introduction of Open Banking. Before we move onto the benefits of Open Banking, let’s quickly recap on what it is and how it works.
Understanding Open Banking Payments
Traditionally paying online takes place when consumers reach the checkout page on a website and manually key in their financial data, which in recent years has mainly been with their credit or debit card. In doing so, consumers run the risk of online fraud. Cybercriminals are notorious for stealing consumers’ card information and using it to pay for goods and services fraudulently. To curb this problem, 3-D Secure was introduced, but while this protects payments to a degree, it is still the full failsafe and also increases the steps needed to complete payment.
Open Banking offers another layer of security in that it bypasses the need for consumers to key in sensitive card data. Instead, when a consumer reaches the checkout page, if they select Pay by Bank (Open Banking), they follow the prompts and open their mobile banking app or banking website to approve the transaction.
According to Forrester
In the UK, the combined adoption of account information services and payment initiation services will rise from 15% of online adults in 2022 to 44% in 2027 — a compound annual growth rate of 23%. Open banking payments will also increase rapidly over the next five years, albeit from a very low base. Forrester predicts the UK will see a rise from 71 million in 2022 to 1.6 billion open banking payments by 2027, a 22,000% increase over the next 5 years!
The Benefits
Open Banking isn’t just a method of payment, it has many other distinct advantages that are fast making Pay by Bank (Open Banking) an increasingly preferred method of payment for the future.
Streamlined User Experience
Open Banking streamlines the buyer’s purchase experience, making it easier for consumers to pay for goods and services. Most of the time when buyer’s choose to Pay by Bank they simply checkout using FaceID on their phone - it couldn’t be easier.
Better and More Tailored Financial Products
As Open Banking allows safe and secure sharing of consumer financial data, it uses it to provide personalised products to customers. It can pretty much tailor experiences to match the consumer. So, consumers receive products that are highly relevant to their finances, financial goals and financial situations. They receive the best possible offers too – and everything is captured in one, single place – usually a mobile app. This cuts out the need to search for financial products online, or by phoning around or by visiting banks and building societies.
Better Control Over Finances
Following on from above, consumers want better control over their personal finance – and by keeping all of their financial information in one place through a mobile app, they can easily access and manage their money. These Open Banking apps keep everything together: bank accounts, building society accounts, loans, credit cards, recurring payments, instalment payments, investments etc. This helps consumers to set budgets, have greater control over their finances and make informed decisions.
Secure and Transparent
Yes – Open Banking is safe and secure because there’s no need to key in sensitive card information or personal details. As well as that type of safety, historically, consumers often mistrust financial products and services, but as Open Banking is transparent, consumers have total control over how their financial information is used – and who is able to access it. Combined with the bank grade security that bolsters Open Banking, consumers have greater confidence in its capabilities.
Open Banking Provides Consumer With Quick Access to Credit
Through Open Banking, consumers can gain credit faster. This is because consumers’ financial data is safely stored so loan companies can generate credit offers quickly. In turn, consumers seeking credit and financing can get hold of the money they want when they need it the most.
Token predicts:
...Open Banking payments will exceed USD 87 billion in Europe over the next five years, and that traditional payment methods such as cards and cash-on-delivery will continue to lose share and account for less than a third of global eCommerce transaction value by 2026.
Summary
This is just the start – as Open Banking continues to evolve, there will be even more advantages. One such advantage that’s used in Mexico allows Open Banking users to receive their paychecks early, which is especially useful when a consumer needs money before payday. Rather than taking out a loan and paying interest, they can navigate their finances without having to pay off a debt. Open Banking is proving to be extremely advantageous for consumers, businesses and financial institutions and is fast becoming of paramount importance in everyday life.