By Dan Edelman, General Manager, Global Merchant Services UK and Head of Pay with Bank transfer at American Express

Open Banking legislation, a series of reforms designed to bring more competition and innovation to the financial services landscape, has existed in the UK since January 2018. As we enter the fourth year of this legislation, new research by American Express in partnership with YouGov* reveals that 2021 is set to be the year that Open Banking goes mainstream.

The research reveals that consumers are demonstrating an eagerness to embrace the benefits of Open Banking payment products. Indeed, many UK consumers have already made the leap, with 41% stating they have already used an Open Banking payment in the past six months or would be open to do so in the next twelve.

With the pandemic prompting a dramatic shift to online, we are spending more time and money online than ever before. ONS statistics** reveal that online shopping accounted for 36% of all UK retail in November 2020, compared to just 21% the year before, in November 2019. As a result of these increased online transactions, our research shows a growing self-assurance in using new digital payment forms, with 33% of consumers stating they feel confident when it comes to trying new Open Banking payment methods.

However, consumers are naturally, and understandably, cautious when it comes to their finances. This is reflected in the fact that nearly half (48%) highlight the importance of checking whether a service is verified by a payment or bank regulator. In addition, a similar number (51%) of consumers express some concerns and reluctance to use a payment method from an unknown brand or provider. This suggests that a key factor to making Open Banking a hit with consumers is for trusted financial / payments providers to lead the way.

There are several factors consumers note that would encourage them to try an Open Banking payment method. In particular, consumers look for a frictionless experience with ease of use (34%), convenience (30%) and speed (21%) representing the key elements to win over potential Open Banking payment users. Indeed, digitally savvy Brits have growing expectations around the functionality and benefits that online payment options should provide.

Merchants should take note – challenges related to issues with existing online payment options are another key factor contributing to the increase in demand for more choice when it comes to online payments. The majority of consumers surveyed (78%) reported that they have experienced not being able to complete an online payment. Reasons vary from technical issues (reported by 44%) to having to enter unnecessary additional information such as date of birth at checkout (22%).

A further one in ten (9%) reported that delays in funds leaving their account resulted in cash flow problems. Issues such as these are likely to result in checkout abandonment or a negative experience that means consumers from making don’t make a repeat purchase. As a result, consumers are looking for alternatives that address these problems and take advantage of new technology like Open Banking. With online retail forming an increasingly large portion of many businesses’ sales, giving consumers what they want and offering a smooth payment process is paramount.

At American Express, our Open Banking payment solution – Pay with Bank transfer – helps businesses with some of these payment pain points. Our ambition is ultimately to see the growth of products using Open Banking capabilities develop over the next few years as more financial services providers, merchants and consumers adopt and use the technology, resulting in an exciting wave of innovation that benefits all.

With e-commerce set to dominate for some time to come, by keeping informed and getting payment technology right, merchants can lay the foundations to make the most of all the opportunities open banking has to offer them.