Open banking has the potential to have a significant impact on payments and payment processing. As a quick background, Open banking is a concept that allows third-party financial service providers to access bank data in a secure and standardized manner, typically through application programming interfaces (APIs). Here is an article on the open banking means to Canada.
We think that open banking can have a positive impact on payments and open up some interesting opportunities. By opening up access to banking data, open banking can enable new payment methods, facilitate faster and cheaper transactions, and create more slick user experiences.
Here are a few ways that open banking will impact payments over the coming years.
Open banking will increase competition: Open banking can increase competition in the payments industry by allowing new players to enter the market and offer new payment solutions. This can lead to greater choice for consumers and businesses and potentially lower costs. We’ll likely see younger, more nimble companies drive the innovation (aka innovators dilemma).
New payment methods will rise: Open banking can enable new payment methods, such as direct bank-to-bank transfers and mobile payments, that can be faster, more secure, and less expensive than traditional payment methods. This will also likely make consumers more open to new payment methods that will even further drive innovation in the market.
There will be an improved user experience: Open banking can provide a more seamless and integrated user experience by allowing users to initiate payments and access account information from a single platform or application. This can lead to greater convenience and efficiency for users.
Better fraud prevention can exist: Open banking can enable better fraud prevention by allowing third-party providers to access bank data and analyze transactions in real-time. This can help identify and prevent fraudulent transactions more effectively than traditional fraud prevention methods.
Open banking will likely transform the payments industry by enabling new payment methods, increasing competition, improving the user experience, and enhancing security and fraud prevention.
As open banking continues to evolve, it will be exciting to see how it impacts the payments landscape and how consumers and businesses adapt to these changes. One thing you can be sure is that Clearly Payments will stay at the forefront as open banking matures.