The Growth of Real-Time Payments Will be Fueled by the Rapid Adoption of Open Banking

According to an article titled «Accelerating Open Banking Adoption Will Drive Real-Time Payments Growth» by PYMNTS, open banking and instant payments are emerging trends in digital banking that have the potential to enhance the financial experiences of consumers and businesses. The article explains that while instant payments offer clear benefits to end users, open banking provides a more indirect advantage by enabling technology providers to establish direct connections with user banks. This is made possible through the use of open APIs, which allow third-party developers to create applications and services around financial institutions. 

Leveraging financial APIs via open banking has the potential to unlock the next phase of evolution for real-time payments, enabling real-time transactions directly from customer accounts by interfacing with any bank. Although currently only a quarter of banking APIs are publicly accessible, banks are expected to increase API access to nearly 50% over the next three years. 

The latest edition of the «Real-Time Payments Tracker» delves into the role of open banking in accelerating the implementation of real-time payments. It also examines how open banking regulations in the United States and Europe impact the adoption and development of real-time payment systems.

Although instant disbursements enjoy overall customer approval, concerns about security persist among consumers. A recent study revealed that 36% of consumers were reluctant to share their card information for push payments, while 33% were hesitant to provide their bank account details due to fears of fraud leaks.

In the United Kingdom, the adoption of open banking services among small to midsized businesses (SMBs) has surpassed consumer penetration for the first time, with 16% of SMBs now leveraging these services. Experts predict that this gap will widen further as the use of open banking continues to grow, which reached a staggering 68.2 million in 2022. The study also highlights the presence of 159 fully regulated firms offering open banking-enabled products in the U.K., with expectations of further growth in the coming years.

Open banking has the potential to revolutionize real-time payment solutions on a global scale. However, the adoption of open banking is not uniform worldwide, with the United States lagging behind the European Union and other countries.

To gain insights into this issue, PYMNTS interviewed Anil Mahalaha, head of solutions at Akoya, who shared the view that achieving open banking proliferation in the U.S. would require a collaborative effort between industry players and policymakers.

The popularity of instant payments is rapidly increasing both in the United States and globally. However, the growth of these solutions is often hindered by the need to integrate with customers’ preferred financial institutions. Open banking can bridge this gap by enabling instant payment providers to connect with any bank’s API, ensuring seamless transactions tailored to customer preferences.

In the current month, PYMNTS investigates how open banking can expedite the implementation of real-time payments, while highlighting the contrasting regulatory landscapes that shape these implementations in the United States and Europe.