A new Juniper Research study found that the value of global payment transactions facilitated by Open Banking will exceed $116 billion in 2026, from just under $4 billion in 2021.
This extraordinary growth rate of over 2,800% over the next five years will be driven by increasing user awareness of Open Banking features, supported by greater deployment within Europe, as vendors build on PSD2 (Second Payment Services Directive) APIs to deliver expanding services.
The research identified Open Banking-facilitated payments, where payments are made directly from bank accounts, as a growing threat to the dominance of cards within eCommerce. While card payments are well established, leveraging permissioned access to bank accounts can reduce fraud risks due to strict KYC (Know Your Customer) rules.
The research recommends payment providers partner with Open Banking API providers now to reduce risks of disintermediation.
Open Banking in Asia-Pacific
According to Juniper Research, open banking progress in Asia-Pacific continues to move forward. “We have seen significant progress in some markets, but overall, it remains a mixed picture. In Australia for example, the Consumer Data Right Act is in force, with India following a similar, regulator-led model in implementation terms,” said the research firm.
The MAS (Monetary Authority of Singapore) has taken a more open role, encouraging vendors to create their own solutions in an open environment. However, outside of these countries, progress has been slower.
Europe Dominating Open Banking Payments
The new research, Open Banking: Key Opportunities, Vendor Strategies & Market Forecasts 2021‑2026, found that Europe will account for over 75% of Open Banking payments users globally in 2026; demonstrating the head start that PSD2 has given this market.
However, the report recommends that API vendors look beyond regulatory minimum requirements to develop advanced use cases such as aggregation of additional products, including loans, credit cards and mortgages, as awareness builds.
Research co-author Damla Sat explained: “While PSD2 is a great starting point, it is not the end goal for Open Banking – supportive regulation must be a platform for much greater innovation. The race is on for vendors to build the most compelling capabilities for the future of Open Finance.”
US market opening up
The research found that recent governmental support within the US will stimulate the growth of Open Banking, and the market will require payments players to develop new capabilities quickly to capitalise. As such, we anticipate acquisitions and partnerships to intensify, so vendors can meet these evolving requirements quickly, rather than developing their own solutions over time.
A Juniper Research spokesperson said: The European example will be a big influence – PSD2 has been highly significant and serves as an example of what a regulator-led approach can look like. The US is more an example of what to avoid – the lack of clarity has been a challenging factor in this market.
Impact of COVID-19
It means digital options need to be available, but this is not really a change to the prevailing market conditions. The pandemic has accelerated digital transitions but does not fundamentally reshape the conversation in banking.