The concept of open banking payments (OBP) may not be new, but it has become one of the hottest topics in the payment industry. The ability to bring account-to-account payments into a range of workflows has the potential to bring disruption to a number of areas, not least digital commerce. At the same time, OBP also creates opportunities for banks to generate new revenues and enjoy cost efficiencies. This Primer provides an in-depth introduction to the concept and value proposition of OBP, along with consideration of the next steps for financial institutions.

The best way to consider OBP is as an ‘on ramp’ to the existing account-to-account infrastructure. While there are many benefits to a payee from accepting credit transfers as payment for goods and services, the experience for the payer is typically far higher friction than to use cards, digital wallets and even cheques. As a result, the penetration of account-to-account payments is very low for these transactions.

OBP addresses many of these frictions, in turn creating the conditions for credit transfers to be brought into a wide range of use cases. The graphic below shows the high level workflow for an OBP transaction.

This Primer provides a detailed overview of OBP, focusing on two themes:

• What OBP is, and the emerging best practice around the workflow and customer experience.

• How OBP can bring value to a number of different customer types and workflows.

For banks, which have lost considerable traction in the payment industry to a range of new entrants, OBP is a considerable opportunity to be at the heart of product innovation and enhancements to the customer experience. This market is still in its infancy, but banks should grasp the opportunity with both hands.

Readers already familiar with the concept of OBP and interested in a detailed analysis of the market opportunity and use cases will find the report Now is the Time for Open Banking Payments useful.