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Open Banking vs. Traditional Payments: The Future of Finance

A substantial shift in the financial landscape is taking place — it is ushered in by open banking, which stands as a transformative force in the financial industry. It brings a more unified, agile, and customer-focused methodology in both banking and payment services.

Over 11 million UK payments were made using open banking technology in July, more than double the number during the same month last year.

While traditional banking systems have been foundational to our economies, they have inherent limitations in the face of rapid digital transformation.

Here, we explore the advantages of open banking compared to traditional banking and payment methods.

#1 Enhanced Customer Experience

Open banking platforms offer a centralised and intuitive user interface, giving customers a holistic view of their financial data across various banks and accounts. Seamless interactions, faster payment processing, and tailored financial insights enhance the overall user experience.

Meanwhile, customers using traditional banking often navigate multiple platforms, each with its unique interface and login credentials. This process can be cumbersome, especially for those with accounts from different banks.

#2 Financial Transparency and Control

By allowing third-party providers access to financial data (with user consent), open banking promotes transparency. Consumers can easily track, manage, and analyse their spending from a single platform.

On the other hand, insights and analytics in traditional banking are generally confined to individual bank platforms, limiting a holistic financial overview.

#3 Innovation and Services

Open banking fosters fintech innovation. Developers can harness open application programming interfaces (APIs) to create innovative financial tools, from smart savings apps to automated investment platforms.

Meanwhile, traditional banks typically offer a set range of services, with limited scope for customisation or integration with external tools.

#4 Improved Payment Efficiency

Instant payments, reduced transaction fees, and real-time payment status updates are characteristics of open banking payment systems. The Payment Initiation Service (PIS) supports direct bank-to-bank payments, removing intermediaries.

Payments in traditional banking, on the other hand, might involve multiple intermediaries, each introducing potential delays and fees.

#5 Enhanced Security

Modern open banking platforms utilise top-notch encryption and security protocols, with tokenisation ensuring data safety. Strong Customer Authentication (SCA) adds another layer of transaction protection.

While secure, traditional banking methods might be slower to adopt the newest cybersecurity innovations.

#6 Customizable Financial Solutions

With open banking, banks and fintechs can collaboratively design tailored financial products, addressing specific user needs. This adaptability encourages a competitive market, ultimately benefiting consumers. 

Lasma Kuhtarska, a Strategic Consultant at Noda, mentioned that the company is developing unique payment features such as Noda Touch, Noda Share, and Noda Go, designed for the travel and e-commerce sectors.

Traditional banks, on the other hand, often offer standardised products, limiting customisation based on individual customer preferences.

#7 Global and Cross-Border Services

Open banking platforms simplify cross-border transactions, serving a global customer base and facilitating multi-currency operations with transparent exchange rates. Noda, for example, operates as a global, multi-currency open banking solution, currently partnering with 1,650 banks across 27 countries.

Traditional systems' cross-border transactions might come with higher fees, extended processing times, and less transparent exchange rates.


Though traditional banking systems have been vital for decades, the digital age calls for a more cohesive, adaptable, and user-focused approach. Open banking, with its plethora of benefits, seems set to spearhead the future of finance. As consumers, businesses, and financial institutions acknowledge its potential, a shift to a more open financial ecosystem appears inevitable.


Comments: (3)

A Finextra member
A Finextra member 09 October, 2023, 08:191 like 1 like

Nice speech but ... do you realize that openbanking is just a layer above bank payments systems, rigth?

I can buy the innovation and the UX part, but the efficiency and transparency have nothing to do with openbanking

A Finextra member
A Finextra member 09 October, 2023, 08:59Be the first to give this comment the thumbs up 0 likes

Thank you for your comment and for engaging with the topic. You're absolutely right that open banking is essentially a layer built on top of existing bank payment systems. It primarily focuses on providing access to financial data and fostering innovation in services and user experience.

Efficiency and transparency, on the other hand, can be influenced by various factors, including how well open banking is implemented and integrated into these systems, as well as the practices and policies of the banks themselves. While open banking doesn't inherently guarantee efficiency and transparency, it can create opportunities for them by enabling better data sharing, competition, and collaboration within the financial industry. The extent to which these benefits are realized may indeed vary based on implementation and other factors.

So, it's a valid point that open banking doesn't directly guarantee efficiency and transparency, but it can play a role in enabling them, depending on how it's leveraged and integrated into the broader financial ecosystem.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 09 October, 2023, 12:271 like 1 like

A2A payments flopped in UK and other advanced economies with high credit card and POS penetration before Open Banking. And I'll put my $$$ that they will flop even after Open Banking. 

I don't buy half of your touted benefits of Open Banking but even if all of them were true, they don't come anywhere close to matching the benefits of credit card such as deferred payment, rewards, and fraud protection that no A2A payment provides, with our without Open Banking.

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