As remote and online payment methods become more popular, businesses and consumers are moving towards cashless transactions.
The American Bankers Association (ABA). research In November 2024, the majority of bank customers use mobile apps to manage their accounts. 22% prefer online banking on laptops and PCs.
Donal Mcguiinness, CEO, Payment Platform firm, is an expert in open banking and payment platforms. Prommt He believes now is the right time to adopt open banking, as well as other innovative remote payments solutions in order to streamline operations and ensure security. He believes that the simplicity of open banking and its security credentials will allow it to grow even further in 2025. This will further impact and shape the fintech sector.
“Open banking is making waves in the financial services industry, thanks to a growing number of instant payment and payout use cases. McGuinness, speaking to the E-Commerce Times, said that as we approach 2025, fraud and data protection will continue to be top priorities in open banking payments.
Open Banking simplifies financial data sharing
Open banking is an arrangement that allows consumers to share financial data securely with third-party service providers via APIs. This process can increase the competition within the financial sector and improve customer experiences.
Account security and privacy can be a concern. Phishing scams are used by malicious actors to trick consumers and companies.
Financial industry reports show that the U.S. has adapted well to open-banking. They expect significant developments, despite the absence of a unified regulation framework. The Consumer Financial Protection Bureau, a U.S. agency, has pushed for greater consumer-centric initiatives in data sharing.
In the U.S., cashless payments are expected to grow rapidly. New technologies and increased consumer adoption will drive this transformation. Digital divides threaten equal access to payment tools.
Fintech and Open Banking: The Role of Fintech
McGuinness shared his knowledge on the pros and cons of this interconnected network of financial practices that is growing as commerce shifts to a cashless system.
E-Commerce Times : What role do you see open banking playing in 2025 outside the U.S. mainland? Especially as more people move to cashless transactions.
Donal Mcguiinness In July last year, 10 million British consumers and businesses were actively using open banking. In 2023, global transaction volumes will reach $57 billion. The upcoming Payment Services Directive 3 The PSD3 (Payment Systems and Account Data) Directive will introduce stricter rules regarding the access to payment systems and account information and more stringent measures for customer authentication.
Pay-by-bank will gain more popularity as people become more aware of their benefits.
Open banking is expected to play a major role in the growth of fintech revenues, which are predicted to grow faster than traditional banking. What are these key drivers?
McGuinness: Consumer awareness of open banking is high — 73% of European consumers are familiar with Pay by Bank. Use is rapidly increasing, especially for those aged between 18 and 29. 36% use it weekly.
Payments made via banking apps are quick, safe and easy with mobile phones. These payments increase user adoption and improve the experience. Pay by Bank can help industries like retail with low margins to stay profitable.
Fintech services will continue to be in high demand as younger consumers with growing disposable incomes, such as millennials and Gen Z are expected to drive the market. Open banking is expected to play a major role in the development of fintech services across retail, investment, trading and personal finance.
What are the main challenges faced by businesses when adopting open-banking solutions and how can fintech firms like Prommt assist in overcoming them?
McGuinness: Flexible payment options are driving Pay by Bank adoption. This avenue is more popular when Pay by Card option is available. The card is not the only option.
Pay by Bank has proven to be particularly effective for high-value transactions. Retailers can automate payment options by using smart payment orchestration. This is based on factors such as transaction value, type, and location.
How can it benefit both retailers and consumers?
McGuinness: This method optimizes payment success rates and helps businesses reduce costly operational costs. It reduces fraud, chargebacks, data breaches, and simplifies the payment administration. It offers customers greater security, convenience and control. The sharing of sensitive card or banking details over insecure channels such as phone calls is eliminated.
How does open banking offer consumers a more convenient and secure alternative to the traditional methods of payment?
McGuinness: The traditional payment methods such as manual transfers to banks are slow and expensive. Merchants will often send bank details to customers in PDF form, and require them to add the payees as new ones before they can make a payment. The process requires customers to complete two different authentications for each new payee and manually enter long account numbers.
This manual process can lead to lengthy communication within an organization. Before goods can be shipped, salespeople must coordinate with finance to ensure that payment is completed. The system also presents significant security threats, as it exposes sensitive information to possible misuse.
What are the benefits of Pay by Bank?
McGuinness: This is an efficient solution. Clients can reduce their card fees and avoid chargebacks by using card payments instead.
Pay by bank simplifies the payment process by allowing users to pay instantly via a link or embedded button. The accounts receivable system is significantly improved by the secure authentication of payments with only a few taps. It allows for immediate transfers and notifications in real time, which speeds up service delivery.
As a leader for ecommerce payments, which innovations will you say have the greatest impact on shaping online payment solutions in the future?
McGuinness: Global payments are at a crossroads due to rapid technological advances, changing consumer expectations and increasing concerns about fraud. To shape the future, regulators, industry participants, and consumers must work together.
Financial data continues to move through increasingly interconnected systems, and fraud and data security remain top priorities. To address fraud prevention and detection, financial institutions and payment providers invest heavily in AI and Machine Learning.
How do you expect the adoption of mobile wallets and apps to affect traditional banks’ strategies regarding payments and customer engagement in the future?
McGuinness: I can see that most traditional banks will invest heavily in similar solutions. They’ll be in a good position to compete. Others are becoming more specialized in lending or other solutions that are not consumer-banking-led.
What advice do you have for businesses who are interested in integrating open banking or fintech solutions into their business?
McGuinness: Begin by identifying the desired result. What is the desired outcome? Is it to lower transaction costs, improve customer service, or reduce operational costs? The entire organization that deals with customers needs to know why this initiative is good and explain it to the customer.