During the last two decades, Open Banking has evolved from a niche concept to a significant force shaping the financial landscape in the UK. And it hasn’t hasn’t just been enabling high-tech systems and flashy apps. It’s changing the way businesses engage with and serve their customers.
For businesses that handle electronic payments – whether retail, e-commerce or utility sectors – Open Banking is being used to improve customer engagement and operational efficiency.
So what innovations can we expect to see that will make Open Banking not just technologically advanced but also more beneficial for businesses?
In this article, we’re zooming in on 10 key developments that promise to change how your business and your customers interact.
1. Customers sharing data reap rewards
In recent years, a renewed focus on customer experience has transformed the way businesses interact with their customers.
But Open Banking, combined with verified personal data, has the potential to turn things around.
Imagine the potential of combining Open Banking with a customer loyalty programme. Your business is probably already tracking customer spending habits. With Open Banking, data can be shared both ways.
By encouraging customers to enable Open Banking, your business could gain greater insights about their habits and preferences to tailor a more personalised experience – more relevant offers, more personalised content and more tailored digital user journeys, to name a few.
As well as deepening your business’ relationship with customers, it strengthens customer loyalty. It would be a win-win.
2. Security at the forefront, fraud in the rearview
Combating fraud and keeping customer data safe is a key concern for many businesses.
Thankfully, Open Banking is enabling better ways to keep your customers’ financial accounts safe. Instead of just relying on a password to approve transactions, it uses several checks to make sure it's really them – such as two-factor authentication and biometric passwords.
This step-up in security can combat the threat of account takeover fraud – when a fraudster gets control of a customer’s account and starts spending their money.
By adding more layers of checks, Open Banking is like having a high-tech lock on your front door, another on the back door, and then an alarm system thrown in for good measure. This makes it really hard for someone to break in and steal your customers’ money – that’s reassuring for your customers to hear!
Identity networks will also come into play. These networks keep an eye out for potentially fraudulent activity, monitoring high-street and online transactions, ATM withdrawals, and transport networks, then raising the alarm if there’s a threat.
3. Harnessing the power of open data
Open Banking isn't just about moving money around. It's also a goldmine of information that can help your business serve customers better.
For example, let’s imagine that your customer loves eating out but is also saving for a holiday. Seeing their spending habits, you could offer them a special dining rewards credit card that also builds up travel points.
It's a win-win: your customer gets a deal that suits their lifestyle, and you keep them as a happy customer.
4. Integrating variable recurring payments
Imagine a payment system that’s flexible enough to manage the variable earning and spending patterns of your customers. That's what a future of Open Banking combined with Variable Recurring Payments (VRPs) might look like.
Unlike traditional Direct Debits, which set payments in stone, Open Banking and VRPs can work together to give you more control over the way you collect recurring customer payments.
Your customer gets to choose when and how much they want to pay, which means fewer surprise charges and less stress about their account balance.
One of the great things about VRPs is that your customers only have to prove who they are once. After that, they can make future payments without having to confirm their identity each time. This is great for things like one-click online shopping, paying back loans and even setting up savings plans.
It's still early days, but Open Banking and VRPs could lead to a future where payment systems are more attuned and able to adapt to unique customer behaviours – enhancing customer satisfaction and loyalty.
5. Boosting your customers’ financial health
Open Banking is like a financial fitness coach with a few extra tricks up its sleeve.
One of these is 'sweeping VRPs', which allows it to automatically move money between your customers’ accounts. This could stop them from going into an overdraft, for example, or help them move money into a savings account each month without lifting a finger.
Open Banking will also support 'Financial Health Dashboards'. These dashboards are like the fitness tracker apps on your customer’s phone but for their money.
As a business, you could give your customers a quick overview at how they’re doing financially and even give them tips on how to improve.
6. The new economics of payments
Accepting payments can be a hassle, particularly if you’re trying to take a payment in another currency. And it's not just you who feels the pain – customers do too.
With Open Banking, the days of clunky payment terminals and extra online fees can finally come to an end. Instead, payments will be quicker and cheaper for everyone involved.
For example, a shop won’t have to deal with as many payment processing middlemen, which means it could offer better prices. And charities will also benefit because more of each donation will actually go to the cause rather than the payment fees.
7. Growth of decentralised finance (DeFi)
If you haven’t heard of DeFi, it stands for Decentralised Finance. And it's shaking things up in the finance world. Think of it as a set of financial services, like loans or insurance, but without a bank in the middle.
DeFi runs on distributed ledger technology, which helps record and share information across multiple computers securely and transparently, without needing a central authority like a bank.
Now, Open Banking is getting in on the action. It will enable your customers to use their regular bank account alongside these new DeFi services.
So if you want to provide a DeFi loan or offer a new type of savings account, Open Banking can enable your customers to easily move their money around and take advantage of your financial products.
8. The subscription economy
Subscription businesses have really taken off. By 2026, the sector is expected to be worth a staggering $12.5 billion1. And Open Banking is going to make accepting subscription payments a breeze.
Imagine being able to see when a customer isn’t engaging with your subscription service as much as they were, tailoring a personalised offer to re-engage with them, and accepting a new recurring payment amount without lifting a finger.
Or imagine charging a variable payment based on the amount a customer actually uses your service each month. For example, gyms could only charge when their customers actually work out, rather than demoralising them with a fixed monthly fee.
Paired with smart contracts (self-executing agreements) and the blockchain (a secure digital ledger), Open Banking could enable these types of flexible subscriptions.
9. Empowering the unbanked
While Open Banking typically works around a customer’s bank account, it doesn’t technically require one. Given that over a million people in the UK don't have a current account2, Open Banking could be a game-changer, allowing your business to offer easy-to-use, affordable financial products that meet the needs of this large market.
For example, Open Banking could make it simple to lend money for customers to start their own small, local business without the need for a traditional bank account.
Not only is this quicker, simpler and more tailored to what people actually need. But Open Banking can also provide tools to help them manage that loan easily on their phone or computer.
10. Banking will get social
In the future, social media could be more than just a place to share photos or updates. It could turn into a place where your customers manage their money too.
Open Banking can make this happen by linking their financial accounts with their social media profiles. With Open Banking, customers' financial data is securely shared between their bank and trusted third-party providers, using rigorously tested encryption and security protocols. This means that when a customer links their financial accounts to their social media profiles, they're not compromising on security; rather, they're enhancing it.
This could enable you to request money just by sending your customer a message. Or, if a customer wanted to split the payment for a larger purchase (such as a holiday) between a group of friends, you could send the payment request on an app that they all use, for example.
In summary
Open Banking Payments are set to revolutionise not just the financial sector, but any business that receives customer payments (whether D2C or B2B).
Whether it’s incorporating personalised offers, variable subscriptions or offering financial services to those who’ve been left out, Open Banking has the potential to change the game.
With the blend of tech and user experience, the future of payments looks not just secure, but also more responsive to the individual needs and lifestyles of customers. So, keep an eye out, because the next big thing in banking is already here.
Read 10 tech innovations that will change the future of Open Banking Payments to learn more.