Unlocking the potential of open banking with instant payments

Written by Paul Thomalla Non-Executive Director, Payments Historian, Podcaster, and Specialist
Unlocking the potential of open banking with instant payments

As Europe continues at an ever-increasing pace on its Instant Payments and Open Banking journey, the direction of travel in this space is clear: towards a future where banks combine Instant Payments and Open Banking in ways that enable them to increase revenues, attract new customers, open themselves up to new collaborations and fend off the growing competition being felt on all sides. To ensure they’ll be disruptors rather than disrupted, banks must act now.

At Finastra we are seeing the appetite in this area increase at a staggering rate. We recently surveyed more than 750 banks and financial institutions across the US, UK, Singapore, France, Germany, Hong Kong and UAE, and found that the appetite for Open Banking is picking up pace. Eighty-six percent of banks surveyed are looking to use open APIs and enable Open Banking capabilities in the next 12 months.

When it comes to Instant Payments, the added value is increasingly recognized worldwide, as demonstrated by implementation initiatives in the Netherlands and the Nordics. However, the adoption rate varies from bank to bank and country to country. Some banks position Instant Payments as a premium product for which customers have to pay extra; in other places this payment method is only used for local P2P solutions. Some of the banks in Europe focus on EBA Clearings pan-European system for instant payments (RT1) or ECB’s TARGET Instant Payment Settlement (TIPS), while others opt for a community solution such as what is implemented in Spain, France and Belgium. Instant Payments are approached in different ways, which makes it difficult to position as the new normal.

Five options for banks in the new ecosystem

Accenture recently outlined1 five options for the roles in which banks could adopt Instant Payments in an open ecosystem:

  1. Customer-facing services: Acting as the customer’s interface to the payments system, especially for corporate treasury.
  2. Payment services provider (PSP): Enabling customers to use their online banking credentials to make instant payments and engage in e-commerce.
  3. Technology provider for corporates and merchants: Helping corporates like large merchants and airlines manage access to accounts, identity services and process payments.
  4. A new pan-European card and payments scheme: European regulators want to break the international card schemes in Europe—and the ERPB SEPA API Access Working Group is considering ways to enable Europe’s national schemes to link up.
  5. “Request to Pay” (RtP) for Europe: RtP—highly successful in the UK—is an overlay on Instant Payments that creates a more convenient user experience. Retaining control of overlays like RtP will help banks maintain their direct customer relationships.

The perfect match

For Europe’s banks and their customers, this is where Open Banking and Instant Payments can become a match made in heaven. We’re already seeing developments in the European market where different players are testing out proofs of concept (PoCs) that bring Open Banking and Instant Payments together. But to unleash the full power of this combination—and support the creation of a fully-functioning European payments scheme across the Single Market—what’s needed is less fragmentation and more standardization of payments processes and infrastructure throughout Europe.

This is the call to action for Europe’s banks. By working together to close gaps, promote standardization and resist fragmentation, they can play a powerful and relevant role in helping to build the new payments architecture for Europe.

In doing this, they’ll create a robust platform on which they can innovate with new customer-centric services that blend Open Banking and Instant Payments—while simultaneously equipping themselves to respond to the growing competitive challenge from the tech giants and FinTech community.

Both open banking and instant payments are solutions that can turn banks into leaders instead of followers again. Especially now that it is clear that banks do not dominate the payment market as they used to do in the last decades. This is mainly due by the development of modern electronic payment systems, new requirements set by regulators and customers and the arrival of agile competitors.

Looking to the future

And as the decade progresses, we can expect to see banks beginning to act as trusted aggregators of financial services via multiple fintechs. This will create new revenue streams as collaboration helps to connect parties, data and technologies, and provide new opportunities, bringing greater transparency and inclusion to the industry.


Written by
Paul Thomalla

Paul Thomalla

Non-Executive Director, Payments Historian, Podcaster, and Specialist

Paul is accountable for the development of Payments within Finastra and externally to understand, influence and ultimately, help lead the change in payments across the globe. Amongst other areas he has advised on the UK’s NPA, PS2 and PSD3, CRD5, the role of AI and Blockchain in Payments and how to...

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