Banking Payments

The Future of Open

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The Future of Open Banking Payments MoneyLIVE | Aiia
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Open Banking remains
something of an enigma, with
much of the general public
still in the dark about not just
its purpose and potential,
but its very existence. One
survey of global consumers,
commissioned by technology
platform Mambu, found more
than half had never even
heard of Open Banking1.

The Future of Open Banking Payments

1
https://mambu.com/insights/press/mambu-research-reveals-global-consumers-are-
hesitant-to-use-open-banking

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But while some consumers may draw a blank if asked to
describe “Open Banking”, growing numbers of them are
already using services and making payments as a result of
this innovation. In fact, the banking, payments and financial
management apps generated off the back of access to consumer
data are providing convenience, insight and control that
consumers are finding they now can’t live without.

Indeed, according to the UK’s open banking services provider2,

three-quarters of those customers using personal finance
management apps say it helps them keep on top of expenditure;
six out of ten said it helped them keep to a budget; and 64 per
cent claimed that savings apps had increased their total level
of savings, providing a financial buffer – and this was the first
time that nearly a quarter of those had ever saved. The research
found that nine out of ten reported the services were easy to use
and set up, and 83 per cent were interested in expanding their
use of open banking-enabled services.

These services can add value in all areas of life, not just banking.
United Utilities, for example, reports that one in two of its
customers have signed up to its open banking scheme, which
launched last year and uses open banking financial data as part
of its income-verification tool to assess if customers qualify for
an affordable tariff3.

Open-banking powered services like this are gaining traction

as consumers are starting to realise the true value of their own
financial data. The Future of Open Banking Payments

“We have seen quite a significant increase in our API calls

and an acceleration in the number of end users in the last
few quarters,” says Benny Johansson, Head of Payments and
Accounts at Handelsbanken. “But most of the increases are
related to account information services, rather than payments,
with consumers seeing value in use cases ranging from lending
and personal financial management to carbon tracking.”

2
https://www.openbanking.org.uk/news/obie-publishes-second-open-banking-impact-report/
3
https://utilityweek.co.uk/open-banking-rolled-out-to-50-of-uu-customers/?utm_
campaign=Daily%20News&utm_medium=email&_hsmi=213938737&_hsenc=p2ANqtz-8uybZ32
EIpWp5rwGcrrUlk9xOmMgLNW1WJNiECigJ0x2_uVYlgh6HALgrw7bjWVOfy5RcOyfiygrHZnIMvK4z 3
Un-f5C7FCx1MfuL5GtJQrieAaDt0&utm_content=213938737&utm_source=hs_email
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In the UK, which has been at the forefront of open banking,
there were 4.5 million regular users of open banking at the
end of 2021 (of which almost 4 million were consumers and
the rest small businesses) with one million new active users
added every six months. According to the UK’s Open Banking
Implementation Entity (OBIE), much of the activity has centred
on information sharing, enabling customers to have better
visibility of their financial footprint and helping them to make
smarter decisions about what to do with their money.

But the past year has seen an acceleration in activity related to

open banking payments, enabling customers to pay for services
or goods directly from their bank accounts rather than using a
credit or debit card. IClick here to enter text.n 2021, HM Revenue
& Customs (HMRC) in the UK became the first Government
department in the world to allow users to make open banking
payments, and as of July 2022, had collected around 2.2
million open banking payments, worth about £5.5 billion4.
This payment method not only significantly reduces the risk of
fraud, but also customer errors, making the payment experience
smoother and saving taxpayer money.

Cumulatively, says OBIE, there were over 26.6 million open

banking payments by the end of 2021, with a predicted increase
of more than 500 per cent in the next 12 months5.

A tipping point
The Future of Open Banking Payments
These numbers represent mere drops in the ocean compared to
more traditional payment methods, with cards still dominating
the UK payments landscape. But it could well be a signal of
where payments are heading and the huge opportunities for
merchants that increase the choices offered to consumers by
adopting an open banking payments solution.

4
https://www.openbankingexpo.com/insights/qa-hmrcs-nick-down-on-winning-the-open-
banking-expo-pioneer-award/
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https://www.openbanking.org.uk/news/uk-open-banking-marks-fourth-year-milestone-with-
over-4-million-users/ 4
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“In Europe, open banking payments have
reached a tipping point and now have the
potential to really shake up the established
payments industry”
Jonas Vogt Rasmussen, Aiia

Jonas Vogt Rasmussen, Head of Banking Solution Sales at

Aiia, a Mastercard company, believes open banking payments
in Europe have reached “a tipping point and now have the
potential to really shake up the established payments industry”.

“We are starting to see adoption at a high scale throughout

Europe,” he notes. “In some European countries, we are way
past early adoption and we are seeing people and businesses
using open banking payments extensively, especially in the
Nordics and the UK, with the other countries now starting to
follow suit.”

Jens Stürup Head of Transaction Banking & Payments,

Lunar echoes this, saying adoption increases every month
as consumers wake up to the potential of a new and more
convenient way to pay. “Customer behaviours have changed,”
he said. “Whereas once people opened bank accounts with the
same bank their parents and grandparents used, today we see
people have not just one but two banks and additional financial
apps. It’s a big change in how customers see the role of banks.”

These changing attitudes mean there has been a decoupling of

banking and payments, with customers now prepared to use The Future of Open Banking Payments
a wide range of payment solutions from a wide range of very
different providers (some of which may not even hold a banking
licence) to make their lives easier, whether that’s splitting a
bill with friends, pre-paying for a coffee on the go or paying
business invoices.

“Customers really do have an appetite to try

different payment services as long as they can
trust it to be fast, seamless and secure”
Jens Stürup, Lunar

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“Customers really do have an appetite to try different payment
services as long as they can trust it to be fast, seamless and
secure,” says Jens Stürup of Lunar.

As Samantha Emery, Payments Industry and Development

Director, Lloyds Banking Group, points out, however, even in the
most gung-ho markets, open banking payments remain on the
periphery, focussed on the ‘me to me’ use case such as paying
down a credit card balance.

“Retail payments from open banking are a fractional

proportion of payments, around 0.2% of UK payments,” says
Emery. “But we are now seeing those volumes rise, around
10 per cent month on month, as customers are growing
comfortable and seeing how it’s not only convenient and easy
but also reduces errors.”

To really shift the needle and harness the opportunity for

growth in commerce, consumers need to be convinced that
open banking payments match the ease and security of
established payment methods.

“It took half a century to build confidence in

cards…consumer confidence is key”
Samantha Emery, Lloyds

“It took half a century to build confidence in cards, the

most popular payment type in the UK, and today customers
confidently use them to manage disputes, returns, and refunds,” The Future of Open Banking Payments
says Samantha Emery of Lloyds. “There’s even protection
against retailer bankruptcy, which given the economic
headwinds we could be heading into will be very front of
mind. Consumer confidence is key. Getting people to switch
from cards means those protections and benefits will have to be
very visible.”

It is not just consumer protections during the purchasing

journey that need to be assured. There is also significant work
to be done to allay concerns about data privacy. In one survey

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of global consumers, 53 per cent believed open banking to
be a dangerous use of data-sharing, and while almost half of
respondents claimed their banks did provide reassurance on
the safety of open banking or provide information on what the
numerous benefits are, with another 24% stating that, while it
was explained, it could have been done in a better way6.

“Privacy means different things to different

people at different times…it’s so important to
know what the customer wants”
Benny Johansson, Handelsbanken

“Privacy means different things to different people at different

times,” says Benny Johansson, Head of Payments and Accounts
at Handelsbanken. “Carbon trackers, for example, are viewed
as very positive by some customers to help them reduce their
environmental footprint but others do not want their bank to
comment on non-bank issues. This is why it’s so important
to know what the customer wants and that solutions are
customer-centric.”

“We need high standards for all participants,” stresses Jens

Stürup of Lunar. “Otherwise, a third-party provider without
good data standards undermines consumer trust in everyone
else. We all need to live up to the same high standards.”

Catherine Zhou, Global Head of Ventures, Digital Innovation

& Partnerships at HSBC, agrees. “We must ensure we are all
well equipped to deal with third party data risks and that third The Future of Open Banking Payments
parties comply with the very high level of security that people
expect from banks,” she said.

Banks also need to overcome the inertia of habit, by increasing

the visibility of open banking payments and nudging customers
down a new payment track. Volt, the account-to-account
payments gateway, has launched Transformer to encourage
shoppers to switch to open banking payments at the checkout
to save on debit card interchange fees. Transformer can
recognise when a shopper is about to pay with a debit or credit

6
https://mambu.com/insights/press/mambu-research-reveals-global-consumers-are-hesitant-
to-use-open-banking

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card and sends a prompt to see if they would prefer to pay
directly from their bank account instead. 

Sweeping up new
opportunities
“This is the next wave of innovation”
Catherine Zhou, HSBC

There is also excitement brewing about the potential afforded

by the large UK banks’ implementation of Variable Recurring
Payments for moving money between a customer’s own
accounts. Known as sweeping, VRPs are akin to smart direct
debits and give customers increased control over their finances.

“This is the next wave of innovation,” says Catherine Zhou of

HSBC. “It means better financial management capabilities for
consumers, whether it’s avoiding unnecessary overdraft fees or
unused subscription charges.”

There’s also the potential to set spending limits over specific

time periods to help consumers self-govern their behaviour
and exercise financial wellness. For banks, she added, there’s
the opportunity to reduce human error and reduce costs while
businesses could save billions in processing fees.

“Many organisations, including us, will look at how sweeping The Future of Open Banking Payments
can be used within customer journeys to really improve the
customer experience through better financial management and
self service,” says Samantha Emery of Lloyds Banking Group.
“The industry is already starting to look beyond pure mandated
sweeping so there will be competition with direct debits and
card payments for e-commerce and subscriptions.”

There are challenges ahead, not least the commercial

framework that sits around VRPs. “The need to contract
bilaterally on specifics but to also build out at scale, sit in stark

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opposition to one another,” notes Emery. “To really hit scale,
there will need to be some standardisation whilst leaving the
commercial terms to the firms participating to develop on a
competitive basis.”

Despite these potential road bumps, it’s hard to understate

the potential of non-sweeping VRPs given the growth of
subscription services streaming content to billions of consumers
around the world. Some of these firms will be keen to explore
innovative payment options to handle these large subscriber
bases. Netflix, for example, is forecast to have 86 million
subscribers in Europe alone by 2026, making over a billion
payments a year for its services.

From SuperApps to super

regulators
Some jurisdictions, of course, have been deploying innovative
payment solutions for some years. In eastern markets, the
SuperApp dominates much of life, from banking to payments to
health care to food delivery.

Yet many experts think the SuperApp will not translate well into
the more mature markets of Europe and North America. “In the
more mature markets, existing methods, such as cards, were
already working well. China went from zero to 100 but here we
were already at 20 so the urge was not so strong,” says Zhou. The Future of Open Banking Payments

And the domination of the superapp even its own

market, may come under pressure from regulators. “Rules
around data sharing are only growing in rigour around the
world, and that includes China, which will put pressure on the
superapps,” notes Zhou.

Regulation is front of mind for all players in the fast-evolving

payments market. It was regulatory action that drove open
banking in the UK and Europe, and is now playing a decisive

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role in Hong Kong and Australia, with the latter country
opening up data to sectors beyond finance, including energy
and telecommunications. This raises the prospect of a cross-
industry data sharing ecosystem, supercharging innovation on
behalf of the customer and giving customers more control over
their data, their finances and their lives.

“There are 58 countries with open banking initiatives and this

creates challenges for market participation,” says Catherine
Zhou of HSBC. “From agreeing on policy to compliance across
multiple countries to the risk for confusion and increased costs
because of policy differences across different countries, there’s
a need for standardisation.”

Market players are already looking ahead to PSD3, the next

evolution of PSD2, which is likely to spur further innovation in
payments, lending, insurance and more. It is expected to make
payments faster and safer while aligning better with the EU’s
legal framework, creating a platform for not just open banking,
but open finance.

A future of change,
challenge and consumer
convenience
Looking ahead, it’s clear the future of payments will continue The Future of Open Banking Payments
to evolve, with this newly data-rich world creating new
opportunities for customers and businesses. Embedded
finance, for example, where payments are pushed into the
background of the customer experience, will capture more
of the customer wallet as they embrace a step change in
convenience, accessing the funds they want when they most
want them: at point of sale.

“Convenience is at the top of people’s wish list

and that’s what open banking payments fulfil”
Jonas Vogt Rasmussen, Aiia

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“When it comes to open banking and many other types of
payments, it needs to be embedded and contextual to enable
that extra level of convenience and choice for people,” says
Jonas Vogt Rasmussen, Head of Banking Solution Sales at Aiia,
a Mastercard company. “Convenience is at the top of people’s
wish list and that’s what open banking payments fulfil. The
payments are in the background so people can focus on the
experience, whatever it is they are doing.”

“Open banking has shaken up the traditional

financial institutions for better”
Catherine Zhou, HSBC

Catherine Zhou of HSBC agrees. “Open banking payments are

not just quick, they’re instant – and once you’ve experienced
that you can never go back,” she says. “Open banking has
shaken up the traditional financial institutions for better. They
need to respond and embrace this challenge because it really
can be a win-win for everyone.”

The Future of Open Banking Payments

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Visit the website:

marketforcelive.com/moneylive

the most experienced open banking platform in Europe, with more than
a decade of experience in fintech and hundreds of clients servicing both
businesses and consumers with open banking empowered services.

Based in Denmark, the company’s mission has always been to empower

people to bring their financial data into play safely and transparently. Aiia’s
platform allows businesses and financial institutions to integrate financial
data and to offer account-to-account payments directly in their services to an
estimated reach of 337 million European citizens.

Today, Aiia has more than 2,700 connected banks across Europe, processes
more than 10 million bank logins and more than a million account-to-account
payments every month for large banks and e-commerce payment gateways.
The Future of Open Banking Payments
The open banking platform has received backing from Danske Bank and
DNB to build a leading pan-European open banking infrastructure to support
financial innovation in the rapidly changing financial services industry. Aiia
provides open banking services to a long list of financial institutions, including
Lunar, Danske Bank, Santander, OP Financial Group, DNB, Resurs Bank, BEC,
Bankdata and Pleo and won the award for Best Mobile Payment Solution at
Finovate Awards in 2020 for it’s immense work on open banking payments
with multiple clients.

Visit the website:

aiia.eu/

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Benny Johansson
Head of Payments and Accounts, Handelsbanken
Benny is Handelsbanken’s sponsor for the collaboration with the Swedish
Riksbank on the e-krona initiative (Central Bank Digital Currency).
Prior to this, Benny has been involved with leading large change initiatives
involving market transformations such as MiFID 1 and 2, PSD2 as well as
leading the agile transformation of a major bank.

Jonas Vogt Rasmussen

Head of Banking Solution Sales, Aiia
Jonas is the Head of Banking Solutions Sales at the European open
banking platform, Aiia, where he drives their financial institution
collaborations. Aiia empowers a wide range of financial institutions with
open banking services, from payments and data to PSD2 compliance and
more.

Jens Stürup
Head of Transaction Banking & Payments, Lunar
Currently Jens is Head of Transaction Banking & Payments in Lunar.
Jens has worked with both management consultancy and mediation &
facilitation - latest for McKinsey & Co.
Jens is based out of Copenhagen, where he lives with his family.

Catherine Zhou
Global Head of Ventures, Digital Innovation &
Partnerships, HSBC
Catherine is the Global Head of Ventures, Digital Innovation & Partnerships The Future of Open Banking Payments
at HSBC where she drives group level efforts to uncover new profit pools,
alternative business models and leading changes from outside in.

Samantha Emery
Payments Industry and Development Director, Lloyds
Banking Group
As Payments Industry & Development Director, Samantha is responsible
for leading the strategic direction on payments, including driving payments
strategy, fostering payments partnerships and managing the Group’s
external relationships across the payments industry and regulators.

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