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Since 2018, open banking has experienced rapid growth, leaping from zero to 10 million monthly users in the UK. The technology now facilitates more than 17 million monthly payments each month and contributes ÂŁ4 billion to the UK economy.
While some merchants have embraced open banking in a bid to keep up with new technologies and achieve cost savings, others are still researching and exploring Pay by bank for their 2024/25 roadmaps. Understanding different use cases for open banking payments and hearing from those with hands-on experience will help payment leaders make informed decisions.
To learn what merchants really think about open banking payments, TrueLayer’s Nadja Bennett, hosted a panel featuring some of the biggest names in UK commerce at the recent Money20/20 event in Amsterdam . The discussion offered insights into how these leaders are integrating open banking in their respective verticals and the results they expect to see. They also explored what steps need to be taken industry-wide to further enhance open banking adoption and efficacy. The panel included:
Yasmin Ferdousbarin, Global Product Director - Fintech at Just Eat Takeaway.com
Nicola Bettari, Director for Payments and Fintech at Lastminute.com
Fiennes Davey, Payments Strategy at Kingfisher plc
Tailor checkout to different regions
International merchants understand the need for localisation in customer experiences. Yasmin Ferdousbarin explains that while Just Eat operates globally across Europe, North America, and Australasia, they “act local,” catering to different customer expectations and behaviours across countries.
The same is true for payments — just like preference for different foods varies by region, so does preference for payment methods. For example, while online shoppers in the UK still favour debit cards, in Brazil and the Netherlands local open banking methods have taken over. In Brazil, Pix now processes more payments each year than both credit cards and debit cards combined. In the Netherlands, iDEAL is the most popular way to pay online.
Yasmin notes that customers are increasingly turning to local payment methods. And a PYMTS x Adobe report shows that 70% of consumers consider the availability of their preferred payment method very or extremely influential when choosing which online store to purchase from.
Yasmin emphasises that offering the right payment methods, in a fast and secure way, “is vital.” The good news? “Open banking literally tackles all three elements,” she says.
Open banking lets users access local payment methods while facilitating a secure and seamless transaction. “[Just Eat] are expanding all local payment methods across all countries, and solutions like open banking will help, for sure,” Yasmin says.
Reduce friction for high-value transactions
Merchants who deal with high-value transactions, particularly in the travel and luxury retail sectors, often face significant payment friction.
As Nicola Bettari from Lastminute.com, the online travel retailer, points out, “There is a huge gap in conversion rates between orders that are below €1,000 and those exceeding €2,000. And no, it’s not just about insufficient funds.”
Lower-value card transactions are often exempt from strong customer authentication (SCA), but high-value ones are not. The need for stringent fraud prevention measures also creates a clunky payment experience, explains Nicola.
Nicola explains the average ticket value for purchases on Lastminute.com is above the starting credit limit level of most credit cards issued across Europe. He highlights the advantage of open banking payments, which allow customers to complete their transactions without maxing out their credit cards. That way, customers can save their credit limit for spending on cocktails when they arrive at their destination “and not on the flight to get them to the cocktails,” says Nicola.
“Do not forget the user. Let’s build [payments] in the most convenient, optimal way with minimum steps, clear explanation and consistency.
Yasmin Ferdousbarin, Global Product Director, Just Eat Takeaway.com
Pay by bank also aids merchants from a fraud perspective. Valid card payments are sometimes wrongly blocked as fraud, particularly when a customer is making a payment from a different location than usual. Open banking payments see high success rates while maintaining security.
The payments are inherently secure because they all have SCA built in. Customers authorise transactions with their bank, via a password or biometric authentication like a fingerprint. While card payments pass through a chain of intermediaries and have SCA bolted on, open banking payments are direct account-to-account transactions, which makes high-value payments smoother. Pay by bank transactions typically involve 5-7 steps (compared to 10+ for SCA card journeys).
Make omnichannel shopping easy
When talking about user experience, many people just focus on interface design. But “it's way more than that,” says Yasmin. “People need to understand the context that customers are in, what they are going through, and what problems they have.” This holistic approach is crucial, especially in an omnichannel context, where customers interact with the brand through multiple channels such as in-store, online, and mobile. Here, open banking payments offer different opportunities compared to purely ecommerce brands.
Fiennes Davey from Kingfisher, a home improvement company, shares that 70% of sales happen in their brick-and-mortar shops. Customers go to the physical stores to talk to Kingfisher experts and design a bespoke kitchen in-store. But then they have to face the cumbersome process of going through tills for these high-value purchases. “Frankly, at the moment, [the customer experience is] not particularly good,” Fiennes says.
With open banking, Fiennes sees “a fantastic opportunity from a UX point of view to change things.” Instead of forcing customers through traditional tills, Kingfisher is exploring options like integrating open banking payments into tablets with QR codes. This approach would make the payment process “really easy, really slick,” enhancing the customer experience and generating significant value for Kingfisher.
The merchant view: How to improve the payment experience for consumers
Despite these opportunities, open banking payments are not yet mainstream. What do merchants need from industry actors — like banks, fintechs, industry bodies and regulators — to help them boost Pay by bank adoption?
Prioritise users
To improve adoption, it’s crucial to prioritise the user experience. For Pay by bank to become a primary payment method, it needs to be as user-friendly as possible.
“Do not forget the user,” Yasmin suggests. “Let’s build [payments] in the most convenient, optimal way with minimum steps, clear explanation and consistency.”
Upgrade communication
Clear and simple messaging is essential to providing a positive payment experience, as many consumers are not familiar with open banking or related terminology. As a newcomer to open banking, Yasmin highlights that this language can be needlessly complex. “99% of the customers do not even understand what you’re trying to say,” she explains.
Nicola argues that messaging has to be “neat, short and spot on.” For him, communication and education around open banking should be led by banks, and then merchants can echo the same terminology.
Yasmin advocates for a more collaborative approach. “Each of us makes a difference, but only together we can make a change,” she says. “Everyone needs to be involved.” Big companies and banks should partner up with open banking providers to communicate with customers about open banking and its benefits.
Get around the chargeback conundrum
Some believe the lack of a chargeback mechanism in open banking payments creates a barrier to widespread adoption. But others believe that providing timely customer service responses and refunds where necessary will be enough to keep customers happy.
Nicola welcomes the opportunity to strengthen relationships with customers by offering mitigation directly rather than entering a dispute via a third party. Yasmin emphasises the importance of instant support. “Users want answers,” she says. If merchants can communicate with customers and help them quickly, the lack of a chargeback mechanism won’t cause a problem.
Speed up settlements
Nicola notes that late payment settlements can be problematic, particularly in the travel industry. While instant settlement is a reality in the UK, it remains a challenge elsewhere. The EU’s SEPA Instant scheme was launched in 2018 to drive instant credit transfers between European banks, but coverage varies across member states. For example, the average daily volume of instant payments is 1.2 billion in Germany but only 108 million in France.
As the ecosystem matures, there is a growing need to address this issue globally to support merchants who cannot wait for delayed payments. In the meantime, merchants should work with open banking providers who provide extensive coverage in their key markets. TrueLayer's bank coverage is 99% in the UK, whilst our AIS and PIS coverage across several markets in Europe is over 95%.
Better payments are on the horizon
It's clear to see from the growing consumer adoption of open banking and with big brands like Just Eat, Lastminute.com, and Kingfisher leading the charge on the merchant side, a brighter payments future is on the horizon. A future where payments are smooth and hassle-free for both consumers and merchants.
Inspired to explore the benefits of open banking in your vertical? Learn more about open banking payments.
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Government boosts Pay by Bank with National Payments Vision
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What are continuous payment authorities (CPAs)?
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