Tink: Open Banking in Europe ‘surging’ but faces ‘major barriers’

The latest report from Tink shows that Open Banking in Europe is well on its way to becoming widespread, if some barriers are dealt with.

Titled ‘The future of payments is open’, the paper takes us on a trip across the old continent, exploring the views of 380 financial executives from 12 European markets, and how prevalent they think Open Banking will become.

Results are almost unanimous across the board, with the tech being positively received by many, albeit due to different reasons.

Talking in numbers, three quarters (74%) of all surveyed execs thought that Open Banking is the preferable payment method with its toughened security and increased fraud mitigation. Moreover, a total of 70% saw the ability to deliver instant transfers as an advantage. Another majority of the report’s participants, 67% to be exact, think that Open Banking has a high potential of benefitting merchants by reducing costs.

Building on Tink’s previous research, the positive sentiments in the latest findings resonate with the 72% of last year’s questioned executives who found payments to be the most lucrative area of Open Banking to invest in.

Further expanding this sentiment, Tink has provided additional details on what do respondents think about the best use of Open Banking payment initiation services (PIS). These largely target areas where consumers might experience inconvenience, frustration, and unnecessary time consumption.

According to the list, the ranking of use cases where PIS are best suited for, from top to bottom, are peer-to-peer transfers, bill payments, fund transfers for investments and savings, and online commerce payments.

Tom Pope, Head of Payments and Platforms at Tink, said: “Open banking has the potential to transform the payments industry. In certain markets we are already reaching a tipping point of user adoption, where financial institutions are embracing the opportunity and investing in a range of use cases. As a result, PIS volumes are growing rapidly.”

Some barriers still exist, however. Highlighted by the report is that consumer awareness regarding PIS still needs improvements, with 75% of respondents describing it as “critical” for the widespread adoption of Open Banking payments.

Pope commented on the issue: “Our research also shows the need for a solid foundation of consumer trust and awareness to allow PIS to reach its full potential. As an industry, we need to work together to create a common language around PIS so consumers can easily understand the service and its benefits.”

Another major hurdle that Tink has put into the limelight is that European instant payment rails that enable real-time payments are currently very limited. This was also brought up in Pope’s statement.

“But there is still some way to go to remove barriers to mass-market adoption,” Pope said. “That’s why we welcome the European Commission’s proposal to mandate the adoption of instant payment rails and call on them to ensure that access to these rails is free for consumers.

“This move will ensure we have the infrastructure in place to continue to innovate whilst encouraging consumer uptake of open banking payments.”

Among the findings, Tink has also put forward some suggestions on how to ensure that Open Banking receives a solid foundation to step on. One of them includes an increased focus on strategic partnerships.

Fintechs, according to Tink, have a huge role to play in this, supporting financial institutions in their mission to enhance user experience, introduce new use cases, and establish business models that benefit all shareholders through the use of PIS.

Pope concluded: “Forging strategic partnerships with fintechs can help financial institutions innovate around APIs to remove friction and improve the end user experience. This is essential to driving mass-market consumer adoption of open banking payments over the next few years.”