Open Banking in Retail: A Missed Opportunity?

For years, card networks have dominated retail payments — and taken their cut along the way. Now, a new model is emerging: open banking. It’s faster, cheaper, and offers smarter data. But here’s the thing: most retailers still aren’t using it.

Despite over 8 million active open banking users in the UK, very few retail checkouts (physical or digital) offer a “Pay by Bank” option. Why? Because the benefits flow to the retailer, while the effort still lies with the consumer. Unless there’s a compelling reason for customers to switch — such as instant rewards or loyalty perks — most will default to card payments.

But the upside is real. If implemented well (especially when tied to loyalty), open banking can reshape the economics of payments. Here’s what’s on the table for merchants who make the move:

1. Lower Fees, Higher Margins

Card fees add up — especially for high-volume businesses like supermarkets, hospitality chains, and online marketplaces. Open banking removes many of the middlemen, meaning lower processing costs per transaction. Over a year, the savings can be significant enough to reinvest in pricing, staffing, or customer experience.

2. Faster Access to Funds

Traditional card payments can take days to settle. Open banking offers near-instant or same-day settlement, giving you faster cash flow. That means your money works harder — whether it’s restocking shelves or paying suppliers early for better terms.

3. Security and Trust

Each transaction is authorised by the customer’s bank, often with biometrics. That means fewer chargebacks, lower fraud risk, and less admin chasing disputed transactions. In sectors hit hard by “friendly fraud” — like e-commerce — this is a welcome change.

4. A Better Checkout Experience

For customers, it’s quick and seamless — if done right. They tap “Pay by Bank,” approve in their banking app, and they’re done. No card numbers. No expiry dates. But this requires frictionless UX and a clear reason to change behaviour — like an instant loyalty reward or gamified perk.

5. Loyalty Is the Missing Piece

This is where most open banking implementations fall short. Customers have no reason to switch unless there’s clear value in it for them.

By tying open banking payments directly to loyalty rewards — like spin-to-win games, instant discounts, or cashback perks — you give customers a compelling reason to choose “Pay by Bank” instead of their usual card.

And the data supports this strategy:

- A 2023 study by Harvard Business Review on gamified retail loyalty found that interactive reward mechanisms increased average spend per visit by up to 22% in quick-service restaurants and fashion retail.
- McKinsey’s 2022 report on “Next-Gen Loyalty” showed that brands integrating real-time rewards into payment flows saw 14–18% uplift in repeat purchases.
- In the UK, brands like Greggs and Pret have reported double-digit increases in ATV following the introduction of mobile-based loyalty tied to payment behaviour.

The message is clear: loyalty incentives not only drive adoption — they drive revenue.

6. Smarter Data for Better Decisions

With consent, open banking unlocks more than just transaction records. Retailers can see aggregated spending patterns across categories — not just what’s bought in their own store. That’s invaluable for personalised marketing, stock decisions, and even store layout planning.

The Bottom Line

Open banking is not yet the default — but it should be part of every retailer’s strategy. On its own, it saves money. Combined with loyalty, it can drive real customer behaviour change.

If you're a merchant asking "Why should I care?", here’s your answer:
Lower fees. Instant payments. Richer data. Happier customers.
But only if you make it easy — and rewarding — for them to use it.