Open banking’s popularity has skyrocketed as it is making transactions simpler for all parties. Research from Juniper Research, the fintech market researchers, has found that due to open banking and the rise of account-to-account (A2A) payments, the instant payments market will grow by 161 per cent. This is up from $22trillion in 2024.
Instant payments are where funds are received in 10 seconds or under, and confirmation of the payment to the parties is available in one minute. The development and implementation of these direct payment methods are being spearheaded by firms such as iDEAL and Twint. As a result of these digital integrations, the need for a card to make a payment is being completely bypassed. Consequently, this is reducing the cost for merchants and complexities for users.
Breaking down instant payment methods
Open banking allows digital wallets to leverage bank payments without requiring partnerships with individual banks; boosting access significantly. The report forecasts the ability to quickly and securely access bank accounts through open banking, alongside bank-backed A2A wallets, will increase consumer instant payment transaction volume from 252 billion in 2024, to over 600 billion by 2028.
A2A wallets are popular for peer-to-peer transfers, often used for informal lending and repayments to friends and family. The report identifies features such as splitting payments between multiple users as a key driver of their popularity.
Additionally, the report recognised the need for greater merchant acceptance of bank payments. Both in physical branches and in an e-commerce marketplace, it is highlighted as a pressing hurdle to greater consumer adoption.
Report author Michael Greenwood added: “To increase adoption, we recommend merchants incentivise consumer use by offering purchase discounts when using bank-linked payments. By encouraging adoption, merchants will benefit from lower fees for each transaction in comparison to cards.”
A sure-fire win everywhere?
The report notes the importance of open banking within most ecosystems but also acknowledges that it will not be effective everywhere. Establishing regulations is highlighted as the biggest hurdle stopping the implementation of open banking. This is because banks will not voluntarily open themselves up to be used by third parties. However, when regulated, open banking can facilitate seamless A2A payments, specifically in a P2P sphere.
Juniper Research also explores the use cases of P2P payments; specifically looking at banking apps, bank cooperation and mobile money. Following this, it identifies the impact enhanced data, fraud detection, and anti-money laundering (AML) have on the instant payments space.
