Stephen Winyard, Director at Salt Edge Ltd, on how travel and online gaming stand to benefit significantly from leveraging open banking payments

Open banking has had an incredible impact since its adoption in 2018, inspiring a wave of change and transformation as it disrupts the financial sector and spreads its influence beyond traditional banking worldwide.

While some countries have already established regulations, others are in the process of expanding the technology’s scope, and more than 40 jurisdictions are just at the stage of implementing open banking. But one thing is certain–open banking has profoundly impacted the way millions of people manage their money and is transforming how businesses operate.

Through open banking solutions, endless possibilities and exceptional experiences are being pioneered across various fields. In particular, it has led to the emergence of innovative services around account aggregation, onboarding, and payments.

According to the UK’s implementation authority, Open Banking Limited, in July 2023, open banking reached 11.4 million payments in that country only, representing a year-on-year growth rate of 102.4 percent. This impressive boost in open banking transactions indicates a growing preference among consumers for open banking solutions, a trend that is bolstered by more and more companies offering account-to-account payments.

And yet, the vast potential of open banking remains largely untapped, with numerous use cases yet to be explored. Here, we want to highlight just two of them – online gaming and travel – where our collaborations with trusted partners and clients have led to valuable insights and innovative solutions.

Breaking down barriers in online gaming

The online gaming industry, a rapidly growing sector encompassing online betting, has witnessed remarkable growth over the past decades and is projected to reach $114.4 billion by 2028, with more than three billion players worldwide. Operators must embrace new technologies to streamline workflows and ensure compliance with strict gambling regulations. Open banking is one such driver for tech innovation.

Open banking payments enable operators to accept payments directly from players’ bank accounts, reducing friction and creating a more transparent environment. This optimises operations, cuts costs, and gives customers a fast, easy, and secure payment method. Users who gamble can enjoy a hassle-free experience with seamless account-to-account payments and lightning-fast deposits. The same applies to payouts, as operators can instantly transfer winnings to any account in the same way. Plus, operators can save costs as external processors are not required. 

Open banking also shields them against fraud in payments. Payments in online gaming are one of the main risk factors mentioned in the recent EU Guidelines on money laundering and terrorist financing. That’s because certain payment methods allow customers to conceal their identity and source of funding, such as pre-paid vouchers for player deposits where it isn’t easy to conduct the same level of checks as with bank accounts. By making use of open banking, where users must go through strong customer identification (SCA), fraudsters are disarmed, as any payment stops once the account owner is informed about its initiation.

Other valuable uses focus on account validation. Even if a payment is not taken, using open banking, the ability to prove a player’s identity from secure bank-grade know your customer is a perfect fit for existing processes. And, as regulations and reforms to the Gambling Act 2005 will focus on player affordability, open banking enables a true and accurate assessment of a player’s income, spending habits and other qualifying data to satisfy these demands.

Possibilities for travel and hospitality

Travel, one of the world’s biggest and essential service industries today, is predicted to reach US$ 1.02 trillion by 2027, with 74 percent of revenue generated online. Open banking transactions’ streamlined, secure, and cost-effective nature can enhance the user experience, lower costs, improve security, and provide valuable data insights to travel platforms. 

While companies aim for prompt settlements, customers crave instant refunds. Open banking can benefit both parties greatly. The payment settlements and refunds are processed in a matter of seconds, enhancing the customer experience and ensuring a competitive edge for the company. 

Taking measures to safeguard against fraudulent activities is imperative to maintain the trust of customers and ensure safe and smooth transactions. When making payments through open banking, users are requested to authenticate themselves via SCA. This ensures that payment authorisation and authentication are user-friendly and secure, providing a reliable payment experience.

Another important objective, especially in the aviation sector, is sustainability. The industry intends to achieve net zero by the year 2050. When it comes to reducing carbon footprint, studies estimate that open banking produces four times less CO2 emissions compared to traditional payment methods by eliminating large amounts of paperwork since documents can be submitted electronically and account-to-account payments rely solely on electronic invoices and receipts. 

Cost-effective transaction fees and zero chargebacks are also key advantages of open banking. According to estimates, travel merchants can save up to 90 percent on payment processing fees by using open banking over other payment methods. And, while traditional payments come with the risk of chargebacks, costing airlines and travel merchants 1.6 percent of total revenue, open banking payments help reduce fraud and chargebacks since the customer has passed the SCA.

A final thought

Open banking is no longer confined to the banking sector. From gaming to travel, the adoption of open banking – or, even better, open finance – is transforming business operations, enhancing customer experiences, and driving innovation. As the benefits continue to unfold, it will reshape industries and revolutionise the way we conduct business in the digital age.