Businesses and consumers are increasingly transitioning to cashless or cash-light transactions, driven by the growing adoption of remote and online payment solutions.
According to American Bankers Association (ABA) research released in November 2024, 55% of bank customers now use apps on phones or other mobile devices as their top option for managing their bank account, while 22% rely primarily on online banking via laptops or PCs.
An expert in payment platforms and open banking, Donal McGuinness, CEO of payment platform firm Prommt, believes that now is the time to widely adopt open banking and other innovative remote payment solutions to ensure security and streamline operations. He also thinks that open banking’s simplicity and security credentials will enable it to grow further in 2025, further impacting and shaping the fintech space.
“Open banking continues to make waves in financial services, driven by a growing variety of use cases for instant payments and payouts. As we head into 2025, fraud prevention and data security remain top priorities for open banking payments, with new regulatory directives and legislation set to enhance privacy, security, and the overall ecosystem,” McGuinness told the E-Commerce Times.
How Open Banking Simplifies Financial Data Sharing
Open banking is a financial arrangement allowing consumers to share their financial data with third-party providers through secure APIs (application programming interfaces). This process can improve customer experiences (CX) and increase financial sector competition.
CEO at Prommt
It can also pose challenges to account security and privacy concerns. Malicious actors often trick consumers and third-party companies with phishing scams.
Financial industry reports indicate that the U.S. economy is adapting well to open banking. They predict significant developments despite the lack of a unified regulatory framework. U.S. agencies like the Consumer Financial Protection Bureau (CFPB) have pushed for more consumer-centric data-sharing initiatives.
Cashless payments in the U.S. are set to expand rapidly, with new technologies and greater consumer adoption driving this transformation. However, a digital divide threatens equal access to digital payment tools.
Fintech’s Role in Open Banking and Remote Payments
We asked McGuinness to share his expertise on the benefits and shortcomings of this growing interconnection of remote financial practices as commerce moves into a cashless economy.
E-Commerce Times: How do you foresee the role of open banking evolving in 2025 beyond the confines of the U.S. mainland, especially as more consumers move towards cashless transactions?
Donal McGuinness: Last July, the U.K. marked a significant milestone with 10 million consumers and businesses actively using open banking. Globally, transaction volumes reached $57 billion in 2023. In Europe, the upcoming Payment Services Directive 3 (PSD3) will introduce stronger customer authentication measures and stricter rules for accessing payment systems and account data.
Instant payments will play a bigger role for payment service providers, and as more people recognize their benefits, we’ll likely see pay-by-bank solutions gain even more traction.
Given that fintech revenues are projected to grow much faster than traditional banking, what are the key drivers behind this growth, and how do you see open banking playing a role in this trend?
McGuinness: Consumer awareness of open banking is high — 73% of European consumers are familiar with Pay by Bank. Usage is growing rapidly, especially among 18- to 29-year-olds, with 36% using it weekly.
Mobile phones are perfect for quick, secure payments directly from banking apps. These payments improve the user experience and drive adoption. In industries with tight margins, like retail, Pay by Bank’s efficiency and cost savings can be crucial to staying profitable.
Looking ahead, younger consumers, especially millennials and Gen Z, with their growing disposable income, are driving demand for fintech services. Open banking will play a significant role in the growth of fintech across retail, trading, investments, and personal finance.
What are some of the biggest challenges businesses face when adopting open banking solutions, and how can fintech companies like Prommt help overcome them?
McGuinness: Flexible payment options drive the adoption of Pay by Bank. We find that avenue is far more successful when the option to Pay by Card is also available. The bank is supplementary to the card.
The success lies in their collaboration, with Pay by Bank proving particularly effective in higher-value transactions. With smart payment orchestration, retailers can automate how payment options are presented based on transaction value, location, or type.
How can this benefit both merchants and consumers?
McGuinness: This approach optimizes payment success rates while helping businesses reduce high operational and scheme/interchange costs. It simplifies payment administration and mitigates risks like fraud, chargebacks, and data breaches. For customers, it delivers greater control, convenience, and security. It eliminates sharing sensitive card or bank details through insecure channels like phone calls.
In terms of user experience, how does open banking provide consumers with a simpler and more secure alternative to traditional payment methods?
McGuinness: Traditional payment methods, such as manual bank transfers, are time-consuming and have high operational costs. Merchants often send their bank details in a PDF, requiring customers to add them as new payees before making a payment. This process necessitates that customers complete two separate authentications for new payees and manually enter lengthy account numbers, increasing the chance for errors, delays, and bad debt.
This manual process often leads to prolonged communication within the business. Salespersons must coordinate with the finance team to ensure payment completion before goods can be dispatched. It also poses significant security risks, exposing sensitive information to potential misuse.
How does Pay by Bank mitigate those issues?
McGuinness: In contrast, it offers a more efficient solution. In place of card payments, clients can avoid chargebacks and card fraud and reduce card fees by 88%.
Pay by bank streamlines payments by allowing customers to quickly pay via a simple pay-by-bank link or embedded button on the merchant’s website. Payments are securely authenticated with just a few taps, significantly enhancing the accounts receivable process. It also enables immediate transfers and real-time notifications, expediting service delivery.
As a leader in e-commerce payments, what innovations do you believe will have more impact on shaping the future of online payment solutions?
McGuinness: The global payments ecosystem is at a crossroads, driven by rapid technological advancements, shifting consumer expectations, and growing concerns around fraud. Moving forward, collaboration between regulators, industry players, and consumers will be key to shaping the future of remote payments.
Data security and fraud remain top priorities as financial data moves through increasingly connected systems. Financial institutions and payment providers are investing heavily in AI and machine learning to address these challenges for better fraud detection and prevention.
How do you see the growing adoption of mobile apps and digital wallets affecting traditional banks and their strategies around payments and customer engagement?
McGuinness: I can see most traditional banks investing heavily in similar solutions and will be in a position to compete quite well. Others are becoming more specialized in lending or other solutions that are not consumer-banking-led.
What advice would you give businesses looking to integrate open banking or other fintech solutions?
McGuinness: Start by knowing the desired outcome. Is it to save transaction costs, reduce operational costs, give better customer choice, etc.? Like any new initiative, the entire customer-facing organization needs to understand why this is a good idea and be able to explain to a customer whether to use Pay by Bank or Pay by Card.