6 Essential Open Banking Trends 2024
New innovative open banking trends are reshaping the financial services industry. Open banking adoption is currently highest in Europe — with user forecasts reaching 132.2 million by 2024 — and the region continues to lead the charge with flagship legislation like PSD3.
While open banking is still a relatively new concept, it’s rapidly gaining traction worldwide. As more and more countries implement open banking regimes, we can expect to see significant changes in how financial data is shared and used.
To help you stay ahead, we’re covering some of the most important open banking trends for 2024. Trends that include:
- Growing open banking maturity
- Rise of A2A payments and digital wallet integrations
- AI Enhancements
- Banking-as-a-Service (BaaS) expansion
- Variable recurring payments (VRP) impact
- Cybersecurity in open banking
What are the key open banking trends for 2024?
1. Growing open banking maturity
Building on its experience, the EU is driving forward-thinking regulatory frameworks like PSD3. The aim is to spur even more innovation across the European financial sector, however, it’s not alone.
Other crucial markets like the US, China, India, and Australia are each showing encouraging, if slower, signs of adoption. For example, the US has new open banking rules, planned for 2024, that are set to shift perceptions of the region’s ‘laggard’ status and bypass the growing pains of open banking previously observed in Europe.
Unfortunately, open banking regulation and adoption is different across the world. As a result, business leaders within different markets face a complex compliance and software implementation landscape. Here, proprietary payment networks offer a vital solution, such as those offered by Brite within Europe. Networks such as Brite’s help businesses overcome individual market adoption barriers and leverage open banking innovations within connected networks.
2. Rise of A2A payments and digital wallet integrations
Open banking-powered account-to-account (A2A) payments, or instant A2A payments, are set to become more available to end consumers via digital wallet integrations like Apple Pay, Google Pay, PayPal and Stripe. Digital wallets already play a pivotal role in facilitating rewards programmes, enabling swift and transparent transactions among businesses, employees, partners, and consumers.
Indeed, earlier this year, Apple launched an open banking payment integration within the UK market. Alongside this, over the next two years, 75% of payment service providers and independent software vendors plan on implementing services such as instant A2A payments within their platforms, too.
3. AI Enhancements
2023 was a standout year for AI, and 2024 looks to be no different – with open banking businesses set to take further steps to incorporate the technology.
Moreover, customer-facing AI systems used within open banking settings have the potential to greatly increase innovation and improve user experiences. For instance, third parties that gain secure access to consumers’ transaction data can provide value-added informational services. In particular, offering tailored product or service recommendations to improve their financial well-being.
Best of all, since user insights are based on real spending patterns, banks and other third parties can offer personalised experiences based on native affordability checks using account initiation service (AIS).
4. Banking-as-a-Service (BaaS) expansion
Banking-as-a-Service (BaaS) is transforming the financial services value chain – and is another one of our key open banking trends. Built on open APIs, the BaaS business model is helping financial institutions to share customer data and incorporate new services seamlessly.
As an example, a recent PYMNTS survey found 42% of consumers look to solutions like BNPL as a direct result of BaaS. The payment method is particularly popular with Millennials, and consumers generally like it for its ease of use and ability to spread payments. With interest rate highs set to continue into 2024, BaaS providers will need to explore how consumer data can help them adapt to the challenges ahead.
5. Variable recurring payments (VRP) impact
Variable recurring payments (VRP) are an open banking initiative currently being rolled out in the UK. The scheme aims to give consumers more control over subscriptions and payment limits on their outgoings. For instance, users will be able to see ongoing payment parameters on their outgoings and amend (or even cancel) them up to the point of payment.
2024 will be a key year for the programme as the UK is one of the most mature markets, with open banking payments doubling to 68 million in 2022 alone. As a result, we think VRPs are set to be the “next big thing” in open banking, with similar schemes likely to spread to Europe and elsewhere in the coming years.
6. Cybersecurity in open banking
Finally, financial fraud remains a critical problem worldwide, with the EU alone seeing the value lost to fraud more than double in recent years. Given this, consumers and businesses alike are looking for better cybersecurity solutions in their financial services.
Open banking once again offers a timely solution, as instant account-to-account payments can minimise fraud risks. By incorporating zero-trust security protocols, robust network security systems and authenticating user identities during each transaction, merchants and customers can bolster their defence against bad actors. Indeed, AI is also playing its part by assisting anti-money laundering (AML) teams in monitoring transactions.
Encouragingly, PSD3 will take major steps to enhance security by improving Strong Customer Authentication (SCA) processes. Want to know how? Check out our detailed PSD3 explainer for more information.
Stay at the forefront of open banking trends with Brite
Open banking is an exciting and dynamic area of finance that’s only set to grow by offering timely and holistic solutions to pressing challenges like fraud and speed of payment. More generally, open banking trends are transforming what 21st-century financial services look like by creating new ways to bolster consumers’ financial well-being.
Europe is the clear leader in open banking adoption, hosting a range of innovative payment services and account information providers. Already into its second generation of innovation, non-bank payment providers like Brite are creating opportunities for merchants to access new payment solutions.
Indeed, Brite’s account-to-account (A2A) payments between consumers and online merchants are extremely powerful, with instant access to more than 3,800 banks in 26 European markets. If you would like to learn more about Brite Payments and stay up to date on regarding the latest open banking trends, get in touch with us now.