Shake It Up

Future open banking revenue pools and competition for them in the UK and Europe

Jan 30, 2025

Open banking in the UK and Europe is due for a shakeout. There are too many companies chasing insufficient transactions, placing strains on cashflows. There can be few, if any profitable pure open banking payment businesses in the region.

With recent M&A and exits, there are signs a shakeout is starting to happen:

1. 2022 – Visa acquired Tink in Sweden for a hefty €1.8 bn1

2. 2022 – Trustly in Sweden acquired Ecospend, a rather mysterious UK company (which, out of the blue won the much-prized HMRC open banking tax contract in 2021)2

3. 2024 – Kikapay, a UK open banking service went out of business3

4. 2024 – Tarabut in the Middle East acquired Vyne4 a PISP in the UK (which announced this week it is ceasing its UK operations5)

5. 2025 – Neonomics in Norway acquired Ordo, a UK PISP founded by the former management team of the Faster Payments Service6.

There has also been activity on the account information services (AIS) side of open banking, such as Apple’s acquisition of Credit Kudos in 2022, a credit risk company. AIS has great potential with uses in credit, insurance and cash management. However, AIS is outside the scope of this article, only payment information service providers (PISPs) are covered here (I may cover the AIS market in a later article).

In the UK, Open Banking Ltd (OBL) lists 228 companies in its directory of regulated open banking providers7, covering account providers that provide account access through APIs (e.g. banks) and third-party providers (TPPs) who use the APIs.

TPPs can be divided into businesses using open banking APIs in their own products e.g. Xero which uses them to automate bank transaction entry in its accounting software; and businesses which aggregate APIs from multiple banks to provide a single API for businesses to allow access to all banks for their own customers, in a service that is starting to be known as Pay-By-Bank8. e.g. Ecospend which enables individuals and businesses to pay their tax bills from their account at any UK bank while on the HMRC website.

It is among these Pay-by-Bank companies (PbBs) where the shakeout will occur. Some ecommerce gateways and acquirers provide PbB services alongside their card services, but it is the PbBs whose core business is to initiate payment transactions where the action will happen - their success is dependent wholly on the adoption of open banking.

Unhelpfully, the search function in the OBL directory has no search criteria for PbBs, but I estimate there are around 20 core PbBs of note operating in the UK9. At least four are inside large financial institutions, specifically Lloyds Bank, NatWest bank, Mastercard and Tink (Visa), the rest are Fintechs ranging from large to small, most of them founded in the past 10 years. At the end of this article is a short analysis of one of the larger Fintechs, Truelayer which has a significant market share of UK open banking payments.

Open Banking Market Size for Payments in the UK and Europe

Based on published rates and equivalent online fees charged by ecommerce payment gateway companies for card transactions, I estimate the average PbB fee is £0.20 or €0.25 per payment.

In 2024, there were 224m UK open banking payments10, suggesting a revenue pool of £45m to share between the 20 PbBs. Annual growth is around 73%, which looks sustainable for the next five years11, resulting in 3.5bn payments in 2029 and a revenue pool of £700m.

Open banking in the UK offers slim pickings today but could have an exciting future.

Further, there is also the rest of Europe. It is seven years since open banking started with the PSD2 regulation, but despite this, adoption in Europe is remarkably low. In addition to a different starting point in the UK12 Europe has more competition to open banking – for example, the long-established account-to-account service iDeal in the Netherlands and popular account-to-account digital wallets such as Blik in Poland, Bizum in Spain and others. There is also the recently launched pan-Europe Wero wallet which has considerable potential. However, with the EPC’s SPAA scheme13 effective since November 2023 and Germany launching the giroAPI14 scheme this month, European open banking payments should be getting a boost.

Unlike the UK, there are no published statistics in Europe for open banking15. However, assuming an adoption path similar to the UK, but at a stage three to four years behind (my opinion/estimate) and scaled up by GDP, I estimate there were 84m open banking payments in 2024 in the rest of Europe, suggesting a revenue pool of €21m. Assuming the same forecast UK growth of 73%, I estimate these numbers will grow to almost 3bn European payments for 2029 and a revenue pool of €726m.

Combining the UK and Europe gives a total of over 6bn open banking payments in 2029 and a revenue pool of €1.6bn. Figure 1 shows the growth in the combined revenue pools over the next five years under the assumptions stated here.

The picture is enticing but clearly it is a case of jam tomorrow rather than an environment for making hay today - PbBs need the stamina and cash to stay the course.

Figure 1 – combined UK and Europe open banking payments revenue pool

The Shakeout

The 20 or so core PbBs active in the UK (many are active also in Europe) are in a strong position to compete for this revenue pool, together with other European players.

The big question though, is, given it is unlikely any PbB has reached profitability yet, will they survive long enough in their current form to ride the growth to achieve profitability, or indeed, will some survive at all?

I doubt all the PbBs will make it through to 2029 in their current form, especially the smaller ones. This is why a shakeout in the sector is probably imminent.

The two key determinants for survival of a PbB are its market share and its runway - the length of time before it runs out of cash (which needs to be longer than the time to reach positive operational cashflow). As well as cash balances, the runway is dependent also on investor appetite and patience to continue or cut their losses. Even PbBs within banks and large institutions with deep pockets are at risk from a loss of internal support, as evidenced last week by HSBC’s closure of Zing, a cross-border payments app, after just one year of operation.

Market Share

A high, or a growing market share allows a PbB to grab more of the revenue pool as the pool grows, strengthening its cashflow. Conversely, with a low or declining market share, cashflow may weaken. Additionally, although the UK is the bigger market for now, I would expect that to survive, a PbB needs to have European (even better, global) ambitions and aim for a decent European market share now to get scale and to compete effectively.

Runway

Those PbBs with a long runway, say two years, are in a good position to benefit from the growing revenue pool as it reaches a meaningful size in 2027 and beyond. Those with a shorter runway may struggle.

The grid in Figure 2 shows these dimensions and the actions a PbB can take depending on where it is on each dimension.

Figure 2 – Actions for Pay-by-Bank aggregators in the UK and Europe

The possible actions for PbBs to take, depending on their quadrant in Figure 2 are:

Sell Up and Exit - PbBs with low or declining market share and a short runway will have little option but to sell up. Unless they have some decent customers, they are unlikely to be an acquisition target due to their low or declining market share. The best they can hope for may be to sell their technology assets.

Merge to Survive - PbBs with a high, or growing market share, but are running out of runway are in a stronger position but will be forced to act – most likely by merging with another PbB with sufficient runway. The merged entity will be able to cut staff, overhead and technology costs quickly, while boosting their market share and transaction volume, putting them on course for profitability.

Acquire to Grow Market Share - PbBs with a long runway but low or declining market share can tough it out for a while longer, but their best bet may be to use some of their cash to buy market share through acquiring another PbB.

Consolidate - PbBs with a long runway and a high or growing market share can consolidate their position and pull away from the pack, just by continuing what they are doing. There may be opportunities to acquire rivals to buy even more market share, but if tempted, they should avoid overpaying. It would be unnecessary to do so and could risk their runway.

These actions are vanilla and simplified, in practice there will be variations and combinations depending on the specific circumstances of different PbBs.

I am unsure if there are many PbBs in the Consolidate quadrant, but it is the place to be. I suspect most PbBs are in the other three quadrants which is why they must take action and why a resulting shakeout is probable. Such a shakeout will be characterised by their positions in the quadrants and by the actions their position forces them to take.

PbBs of course have the alternative option of raising more cash to keep going. However, in today’s economic environment and with the large aggregate sums VCs have invested so far in the open banking sector, that door is probably closed for now.

I expect that PbBs have been evaluating their options and strategies for a while, as have investors and other businesses on the hunt for acquisitions.

2025 could be an eventful year.

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Truelayer

Founded and headquartered in the UK in 2016, Truelayer describes itself as a European open banking payments network. It holds an Electronic Money Issuer licence in the UK and a Payment Institution licence in Europe issued by the Central Bank of Ireland. It operates in 21 European countries and the UK, which is by far its largest market.

Truelayer’s investors include Northzone, Stripe, Tencent Holdings, Temasek Holdings and Tiger Global. It has raised $321m in total, the latest funding was in October 2024 when it raised $50m16. It has 200 - 300 employees.

Its accounts filed with the UK’s Companies House17 show it had revenue of just £12m and a year-end cash balance of £51m in 2023. It burned through about £57m that year. I estimate it processed 62m open banking payments in 2023, split 60m in the UK and 2m in Europe, giving it a UK market share of 46% and a European share of 5%. Figure 3 shows these figures and my estimates of how the business may have performed in 2024, with forecasts for the following three years.

Figure 3 – Illustrative Figures for a Pay-by Bank PISP

My estimates are based on Truelayer maintaining its 2023 market share in the UK and Europe to derive the transactions processed (from my market sizing forecast) and from that I have applied the transaction fee assumption of £0.20 to calculate its revenues for 2024 - 2029.

A key variable is the UK adoption of commercialised variable recurring payments (VRPs). Currently they are growing strongly from a low base and the UK regulators are agreeing a commercial model and rules for them under a new operator18, which many believe will be a positive step to drive up volumes – much of my market projection hinges on the continuing strong growth and commercial success of VRPs.

Figure 3 is illustrative only – I have no knowledge of the business other than public information. The estimated and forecast figures could turn out to be very different to those shown, especially in Europe where the market size could vary significantly from my estimate and Truelayer’s market share there could be much higher. Use it only as an illustration.

However, it shows the importance of market share and runway.

46% is a very high market share for any business, which could be a struggle to maintain (although it could also be an over-optimistic figure in my analysis). If Truelayer can maintain it and if my market projection is realistic, it should become cashflow-positive in 2026, assuming the cash burn rates shown. Even if my forecast for its transaction volume is 25% off (84m fewer transactions) in 2026, it should still reach break even cashflow next year.

The necessity of the $50m (£38m) funding round in 2024 to lengthen its runway is apparent – without it and without a 25% reduction in staff19 just beforehand, its cash balance could have dropped to a very low level this year.

Truelayer needs to execute well to retain its market share, but overall, Figure 3 suggests it enters 2025 in a good place, positioned in or close to the top right quadrant in Figure 2.

Agenda: Payments

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