When Open Banking first came into force in 2018, many wondered if it would mean the end of the card payment era. This new way of banking and data sharing brought a lot of confusion and questions to banks and other financial institutions, just like most changes do to legacy-ruled systems.
Nearly half a decade later, Open Banking is rapidly growing and shows a lot of potential to surpass the popularity of card schemes. It’s intensely challenging the dominance of card networks, and doesn’t show signs of stopping anytime soon.
Here are four examples of how Open Banking challenges the dominance of card networks.
1. The rapid growth of Open Banking popularity
According to The Open Banking Impact Report, in the UK alone, from October 2021 to March 2022, 21.1M Open Banking transactions were made. During the same period a year before, there were 6.1M payments. This shows an exponential annual growth, and the month-on-month growth for open banking payments is also high, around 10%. Juniper Research predicts the global growth rate of Open Banking transaction value to be 2,800% between 2021 and 2026.
As the statistics show, Open Banking is rapidly growing. More and more companies are offering payment initiation and account information services, and more businesses and consumers recognise the benefits of Open Banking.
With such quick growth, Open Banking-enabled account-to-account (A2A) payments have the potential to become one of the most popular payment options and eventually overtake card payments. This comes as no surprise, as this payment method is convenient for both merchants and their customers, contains less fees, and enables quicker settlement of funds.
2. Open Banking is pushing out legacy payment systems
Open Banking is built on modern payment rails that are more resilient than legacy payment systems. Legacy systems were built years ago when the payment industry lacked regulations and transparency, which resulted in financial institutions building their systems in many different ways.
Modern payment solutions, including those powered by Open Banking, bring various benefits to companies. These benefits include better internal financial management, more data and insights for analytics and data-based business decisions, enhanced security, etc.
Meanwhile, bank cards often rely on legacy banking systems. The maintenance of these systems is expensive and inefficient. Even more, trying to fix such systems can even lead to their breakage.
3. Better payment flow
Compared to the card payment flow, the Open Banking payment flow is significantly shorter. It eliminates the card networks and, therefore, all the related fees. Eliminating unnecessary intermediaries also boosts security, as consumers’ personal data is shared among fewer parties.
A shorter payment flow also means quicker settlement for businesses, so the sellers receive their money faster. In the case of online shopping, it means merchants can ship the goods faster and access their money much quicker, compared to card payments.
4. An option to choose
Open Banking created a new convenient payment method that has the potential to become more popular than other payment options. For a long time, merchants and other businesses had to deal with card payments and pay unnecessary fees simply because there was no better option.
A2A payments are more consumer-centric and offer more benefits than card payments. Consumers don’t have to enter card details when they’re shopping online, they don’t have to replace old cards and can enjoy a quick and smooth checkout process.
This payment option benefits both merchants and consumers, contrary to card payments which mainly benefit the companies that are involved in card processing.
Account-to-Account payments for your clients
Open Banking has created new opportunities for businesses and financial institutions. People are turning to more convenient, sustainable and effective ways of living, and payments are a significant part of peoples’ lives.
kevin. enables companies to offer A2A payments to their clients both online and in-store, so you and your customers can enjoy the benefits of Open Banking. Choose kevin. and you’ll be offering the most popular payment method that surpasses card payments in no time.