After strong momentum in 2021 Open Banking could be front and centre for the finance industry in 2022, writes Wise's Lars Trunin.
At the end of a tumultuous year, having more hope for the future is what keeps us going, especially when things have been hard.
It’s no secret that Open Banking uptake has been slow. It’s been a significant point of criticism since its launch in 2018, and we know that banks have dragged their heels, leaving consumers unsure what the actual benefits are.
But for all its faults, 2021 saw some major positive movements for Open Banking. The momentum of last year means that Open Banking could really be front and centre for the finance industry in 2022. As an industry, we’ve not been short of optimism for Open Banking, so what exactly is it that’s going to propel us forward into the new year?
We saw the end of the 90 day re-authentication rule
90 reauthentication was a huge bugbear for some fintechs. It meant third party providers needed customers to go into their app every 3 months, and re-confirm the connection between this and their bank. It added friction, created an inconvenient experience for users, and in some cases caused customers to drop out of the process altogether.
With this being removed as of March next year, one of the biggest ‘sticking points’ for fintechs will be gone. It’s a first step in making Open Banking more user friendly, and crucially, it shows that the FCA is listening to fintechs about what they need to create genuine competition.
Amazon ended its relationship with Visa over card processing costs
Not too long ago, Amazon stopped accepting Visa payments on its site, claiming the fees being charged were too high. It was a high profile moment, with two stalwarts of the retail and payments industry going head to head.
It’s unclear what the next steps here are. Some people argue this is a high level negotiation tactic from Amazon to get a better deal, others think it’s a legitimate move away from card spending which could define retail payments for the future. What we do know, is that what happens next will set a significant precedent. If Amazon does win the fight that card fees are too high, Open Banking offers a legitimate alternative, without the costs of using card payment rails. It’s certainly going to be one to watch over the next few months.
The introduction of VRPs was confirmed for 2022
VRPs, or Variable Recurring Payments, are one of the more exciting elements emerging in Open Banking today. VRPs and Sweeping offer a major opportunity for people and businesses to ‘unbundle’ their banking services.
Instant payments between customer accounts mean that it would be even easier to have an overdraft with one provider, a credit card with another provider, and a currency account with a third. Money could move seamlessly and automatically between accounts to meet payments and deadlines, allowing people to find the best provider across a range of FIs. It’s a genuinely game-changing advancement for Open Banking.
It unlocks the possibility for smarter features for fintechs in the future, such as automatically topping up when your balance is low, or funding transfers on a pre-defined schedule. It removes a significant barrier, makes paying more convenient, and gives consumers more options when choosing a payment method.
We’re seeing Open Banking evolve much quicker than it has in the past. High profile movements at Amazon regarding card payments, major changes from the FCA on reauthentication, and the introduction of VRPs all signal that 2022 has the foundations to be one of the best years for Open Banking.
The views and opinions expressed are not necessarily those of AltFi.