Open finance and the future of the payments industry

Open finance to bolster the payments sector similar to open banking

The payments industry is poised for significant transformation under open finance, which will entail substantial revenue increases. However, the industry is also facing intense competition from a broader range of financial industry players, including FinTech startups, traditional banks, card networks, and super apps. This heightened competition will drive consolidation in payment usage, with customer preferences playing a critical role in shaping market dynamics. To thrive amidst this competitiveness, institutions must focus on meeting and anticipating customer needs and making seamless and integrated payment experiences essential. As the industry evolves, select payment solutions are also gaining traction by aligning closely with these changing customer expectations. This alignment not only reinforces their importance but also highlights the promising growth projected for these solutions.

Account-to-account payments (A2A) to gain popularity

Despite their existence prior to open banking, A2A payments gained mainstream traction with the advent of regulated third- party financial service providers. Regulatory developments such as the SEPA Payment Account Access scheme invite any EU bank or regulated FinTech to offer A2A payments and data services via APIs, benefiting merchants and consumers alike.

Open finance data sharing will further expand A2A models, enabling common APIs for payments between service providers and fostering an interconnected ecosystem of instant payment apps. Strong customer authentication measures and standardised APIs will facilitate seamless payments across platforms.

Mobile and digital wallets to extend their growth through open APIs

Digital wallets-inclusive of pass-through wallets, stored value wallets, and mobile money wallets- continue to dominate the global e-commerce landscape, accounting for 50% of total transaction value in 2023.11 As the fastest-growing payment method in e-commerce, digital wallets are projected to grow at a CAGR of 15% through 2027.12 The integration of open finance functionality into digital wallets allows users to top up their wallets with just a few clicks, without incurring additional costs. This combination of convenience and security is driving their popularity among consumers and businesses alike

BNPL solutions will become more personalised

Open data solutions have fuelled the expansion of BNPL services, allowing consumers to split payments into interest-free instalments, making high-value purchases more accessible. BNPL providers use APIs to access detailed transactional data, enabling better customer credit and risk assessments. This data can also be monetised within an open finance ecosystem, providing additional revenue streams

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