Will Open Banking take over from card payments?

Allowing customers to pay online direct from their bank accounts could mean quicker, slicker and cheaper payments for you. But will Open Banking payments ever rival or surpass cards?

Sometimes known as account-to-account payments, or A2A for short, Open Banking connects customers to their bank accounts locally to enable payment in seconds. It’s speedier, simpler and safer for them. It also helps boost conversion and cost-effectiveness for those being paid.

Head-to-head against card payments, Open Banking means potentially lower payment costs for e-commerce retailers and gaming operators, with better cashflow and no chargebacks. But will Open Banking take over from cards?

Pushing on an open door

Perhaps the question is slightly misleading as it assumes cards are the dominant way to pay today. In 2022, credit and debit cards only represented around 32% of global e-commerce transaction values. This is predicted to fall to 26% by 2026, according to card acquirer Worldpay.

In other words, two-thirds of payments online don’t rely on a card now. In two years’ time, it will fall to three-in-four. This is not surprising as bank account-funded payments have long been popular, especially in Europe.

For example, 70% of all e-commerce transactions today in the Netherlands are made with iDEAL, a bank transfer method. In Germany, credit cards are in distant fourth place for e-commerce payments (12%), behind PayPal (30%), payment on invoice (24%) and direct debit (21%). Meanwhile Poles pay for just 18% of online purchases using credit cards, preferring to use bank transfers (54%) and e-wallets (18%).

So, it stands to reason that if you’re targeting European customers. Or looking to expand your e-commerce operations in Europe, Open Banking payments may help unlock new revenues and opportunities.

Open Banking: a compelling proposition

The Open Banking proposition for both consumers and businesses is strong – stronger than cards in some areas.

• Convenience – while account-to-account payments have existed for some time, the UX for Open Banking payments is slicker and quicker. There’s no need to top up wallets or type in card details on the tiny keyboard of a mobile device.

It’s also easier than logging in to online banking and manually completing the payment process step-by-step. When integrated at checkout, customers simply:

1. Select bank transfer
2. Find their bank
3. Confirm payment

1-2-3. That’s it.

• Coverage – consumers can also make local bank payments to sellers globally. Similarly, businesses have access to hundreds, if not thousands, of banks and their customers through a single integration.
• Speed – Open Banking funds transfer is faster than cards. In fact, it’s usually instant or near instant. This is transforming the speed of payment for consumers. Plus, the speed of settlement for sellers, with all the benefits for cashflow and working capital efficiency.
• Cost – as funds move direct from one account to another, Open Banking payments cut out the middlemen, making them cheaper for sellers than cards. What’s more there’s no concept of card interchange, chargebacks or card industry data security standards (PCI DSS), or the associated costs.

Bank-funded payments but better

Account-to-account payments are what Europeans know and feel comfortable with. The proposition for Open Banking payments is compelling and pushes on an open door to transform payments in Europe.

Inpay Open Banking offers a single API to access a global network of banks and their customers. This helps ensure a smoother, safer payment journey for end-customers and the potential for better profitability for you.