Frictionless Future: How Open Banking is Transforming Retail Payments and What to Focus on in 2024
BFSI General RetailTech

Frictionless Future: How Open Banking is Transforming Retail Payments and What to Focus on in 2024

By Priyobroto February 08, 2024 - 143 views

Retail payments and the overall retail banking space may witness a major transformation in 2024 from a global perspective. Open banking facilitates banks and financial institutions to share data seamlessly with third-party financial entities via open banking APIs. These third parties may include several lending firms, expense-tracking entities, and more, which use this information for creating a broader range of products and services. The ultimate beneficiary may the customer, since this open exchange of data will enable contemporary financial services entities ensure more client-centric and personalized solutions.

Open banking is growing rapidly and steadily into a mainstream framework for banking and financial institutions. There have been several reports of how open banking payments have doubled in 2023 across the UK as compared to earlier periods and also how 1 out of 9 consumers are already making use of open banking currently. Account-to-account payments have also garnered aa major chunk of online payments while future projections indicate future growth. By 2024, open banking may become a key component of retail payments and the whole retail banking spectrum. Here’s getting a closer glimpse into the same.

A Little More About Open Banking

Open banking is a system where banks open their APIs or application programming interfaces, enabling third parties to conveniently get access to financial data required for the development of new programs and services  while enabling more transparency choices for account-holders. Some instances include BBVA launching Open Platform, its own BaaS platform in the US in 2018. This helps third parties offer financial solutions to customers without requiring a full banking service suite.

HSBC also launched Connected Money as an app in 2018. Customers can easily view their bank accounts, mortgages/loans, and credit cards at a single place. Barclays also enabled account aggregation within its app for mobile banking. Customers here can view their accounts with other banks on the Barclays mobile banking app.

What are the Advantages of Open Banking?

What are the benefits of open banking for the retail banking system as a whole? Here’s looking at the same.

  • Open banking can unlock newer streams of revenue for financial institutions while also scaling up consumer reach considerably.
  • It can help build revenue-sharing environments where customers can access third-party solutions while profiting from referrals/subscriptions.
  • Banks can leverage open banking for commercializing/monetizing their internal infrastructure and shift into the BaaS segment while offering services to third parties and fintech players alike.
  • Open banking brings in more streamlined procedures of payment, doing away with added forms and other security steps/measures required. This is where it can revolutionize retail payments greatly.

2024 Predictions for Open Banking

Here are some of the key trends that can be anticipated in the open banking sphere in 2024 and beyond.

  • A more supportive and conducive global regulatory landscape for open banking.
  • Higher sophistication in terms of API integration and an expansion of open banking beyond retail payments and account data towards including a wider financial service range.
  • Digital wallets may witness evolution, transforming into repositories of crucial personal documents including health insurance, identity cards, and more. This will enhance overall interoperability and control of users in terms of managing their digital identities. It will ultimately drive a shift towards a more efficient and connected digital way of functioning.
  • Retail payments will become more sophisticated and streamlined with open banking. There will be more emphasis on integrating payment systems throughout multiple points of consumer interactions. There will be more advancements in omnichannel-based experiences, including the convenient fusion of in-store and online shopping which caters to contemporary consumer expectations.
  • Open banking will create an environment where conventional methods of payment will witness higher competition in comparison to more affordable, secure, and highly efficient payment solutions. Cards will grapple with challenges posed by open banking players in 2024 and beyond.
  • Open banking will ultimately enable better financial management. It will ensure more affordable transaction procedures for consumers and businesses. This will enable higher cost-related efficiency as compared to conventional methods of payment. It will also usher in more personalized financial management and user control.
  • Open banking will also work wonders in terms of creating more personalized, convenient, and seamless user experiences.

Hence, as can be seen, open banking will enable numerous advantages and transformations worth looking forward to in 2024 and beyond, not just in the sphere of retail payments, but also retail banking as a whole. It will create a more connected ecosystem where consumer experiences are also swift and more personalized. The whole process will bring about lower costs and higher efficiency for financial services players and banks alike.


Are there security concerns associated with open banking in retail payments?

There are some security concerns that are linked to open banking for retail payments, keeping data privacy requirements at the forefront. These are majorly maintaining privacy with encryption and other measures and Cybersecurity measures in general. This is because customer data will be shared in this case with third party providers.

Does open banking just cover payments?

Open banking does not only cover retail payments and makes them simpler and more convenient. It also has various use cases pertaining to credit checks, personal finance, verifying identity, personalized services for consumers and more.

How does open banking foster innovation in the retail payments sector?

Open banking enables greater innovation in retail payments through enabling third party providers to readily access bank information/data. It can thus spur innovation which leads to more efficient and personalized consumer experiences.

How does open banking impact the user experience in retail payments?

Open banking has a major impact on user experiences in the retail payments space. It will make payments easier and smoother without multiple security steps and processes. It will also ensure secure and quicker payment choices for users.

How does open banking contribute to making retail payments more frictionless?

Open banking contributes greatly towards making retail payments frictionless and free from any hassles. It enables direct bank payments and these can be accepted from customers by merchants on their channels in a swift and secure manner. There are several steps and processes that customers or merchants do not have to go through in this case.

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