Thursday, June 20, 2024

One in five now make payments using Open Banking

One in five Brits are now making regular payments via Open Banking (21%) according to research carried out by Moneyhub.

Open Banking payments allow users to make a payment directly through their phone’s banking app or online banking account directly to another account, which can be a quicker and more cost-effective alternative to other payment options such as card payments, standing orders or direct debits.

While cards remain the dominant payment method on the high street and online, businesses are exploring alternative options for their customers, often triggered by high acquiring costs and settlement delays which are impacting cashflow.

The stranglehold that direct debits overwhelmingly have in the regular bill payment sector (where 70% of Brits use this payment method for their regular bills) will be challenged as Open Banking’s variable recurring payments become an option.

Open Banking payments are increasing in prevalence and relevance. Indeed, Moneyhub’s research comes following figures showing that payments made with Open Banking hit a milestone earlier this year, hitting 11.78m transactions in September, with the number of active payment users surging by 68.2% in July 2023 compared to the same month the previous year.

This alternative payment method is increasingly being used by the younger generations with 29% of 16-24 year olds and 26% of 25-34 year olds making payments using Open Banking. In comparison, just 13% of those aged over 55 years old use Open Banking payments.

Interestingly, close to half of those that classed themselves as full time students (44%) are using Open Banking to make regular bill payments.

Payment type % of Brits using % 16-24 year olds % of 25-34 year olds
Direct Debit 70% 47% 63%
Through my phone with Open Banking 21% 29% 27%
Through the website 21% 21% 22%
Standing Order 18% 11% 15%
Payment on the phone 10% 14% 14%
With a cheque 2% 3% 1%

Mark Munson, MD of Moneyhub’s Payment Division comments: “The world of payments is constantly evolving, and the Smart Payment revolution that Open Banking enables is set to shake up how we manage our regular bill payments. Fifty years ago we would have seen payment by cheques or cash as the predominant tool to pay for bills, then direct debits and standing orders grew into popularity.

Now, Open Banking is set to join the fold. Quicker, more efficient, offering greater flexibility and largely more cost-effective for both the merchant and customer, Open Banking payments are readily being embraced by a new generation of consumers.

With new, innovative and more flexible propositions coming to market, Open Banking has demonstrated that early adopters of those services, not only demand a greater choice in what they are buying, but how they are buying it. They are not wedded to payment solutions that are of their parents, or grandparents generation.”

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