Open Banking Forecast
compared to contactless and Faster Payments
Last December I wrote an article about how the growth in UK open banking payments is slowing – from 171% (by volume of transactions) in 2022, to 90% in 2023. I forecast that growth would slow again to 59% in 2024, predicting there would be 44m txns in the first quarter this year, 93m in the first half and 206m for the whole year.
The actual numbers were 45m payments for the first quarter and 97m for the first half – and my revised figure for 2024 is 225m payments, a 73% increase on 2023, better than I predicted last December, but only by 19m payments and still down on the 2023 percentage growth.
My benchmark for a successful new payment method is the contactless card, the largest and most successful new commercial payment product introduced in the UK this century. According to UK Finance, there were 19bn contactless card transactions last year, over a third of all UK payments.
Open banking has a long way to go to match this, but its addressable market - ecommerce and bill payments is enormous. As a start, to have a meaningful impact, open banking payments need to reach at least 5% share of UK payments, or 2.5bn payments.
My forecast for open banking payments over the next five years is shown in the graph. The blue bars continue the current trend of positive, but declining annual growth rates, the orange bars show volumes if growth is sustained at 73% per year, my growth prediction for 2024. For context, in their first 10 years (ignoring the first two years after launch), contactless annual volume growth ranged between 116% and 257% and Faster Payments between 20% and 49%.
We shall see in due course which path open banking takes to reach 2.5bn payments. It is unlikely that open banking will emulate the fast growth in contactless card transactions, but it is growing at a quicker pace than Faster Payments at a similar stage.
Open banking has a commercial impetus behind it, with over 20 bank and non-bank payment providers driving it - with the right product-market fit, they have all to play for.
#payments #openbanking #fasterpayments #contactless