UK Small and Medium-Sized Enterprises (SMEs) Show Apprehension and Interest in Open Banking: Despite Depicted Interest, Knowledge Deficits and Disjointed Barriers Impede Forward Movement

UK Small and Medium-Sized Enterprises (SMEs) Show Apprehension and Interest in Open Banking: Despite Depicted Interest, Knowledge Deficits and Disjointed Barriers Impede Forward Movement

The current state of Account-to-Account (A2A) payments adoption among UK Small and Medium-sized Enterprises (SMEs) reveals a growing interest but a relatively slow and fragmented uptake. While awareness of open banking and A2A payment possibilities is increasing, significant challenges are tempering adoption.

A survey of 500 senior decision-makers across UK SMEs by The Payments Association has shed light on the varying attitudes towards A2A payments among different sectors and regions. The findings reveal a fragmented adoption landscape, shaped by competing priorities such as fraud fears and functionality gaps.

Retail and healthcare businesses show the greatest enthusiasm for open banking, with 58% and 66%, respectively, highlighting its potential to enhance the customer experience. In contrast, real estate and legal services firms cite security and consumer demand concerns as significant barriers. London leads with 75% of firms having a timeline for A2A payments adoption, while the Midlands and South lag behind.

Customer experience, faster settlement, and lower fees top the list of perceived benefits of A2A payments. Larger firms particularly value faster settlement times, but medium-sized firms express heightened concerns about fraud, dispute processes, and limited recurring payment functionality.

However, over a third of SMEs are unclear about how A2A payments work. No single barrier dominates in preventing A2A payments adoption: fraud concerns, lack of consumer demand, and technical complexity are cited almost equally.

The Payments Association's Director of Policy & Government Relations, Riccardo Tordera Ricchi, stated that there is a significant gap between awareness and understanding of A2A payments among UK businesses. To drive open banking adoption, The Payments Association urges the industry to communicate benefits clearly and consistently, agree on consistent language and terminology, address integration and security concerns directly, boost consumer education and engagement, and work with regulators to clarify rules and enable greater functionality, including Variable Recurring Payments.

Open banking, originally focused on improving access to financial data, has frameworks for consumer protection and standardization in payments that are still evolving. Industry and policymakers must work together to simplify integration, boost consumer and business confidence, and ensure the regulatory framework evolves in step with SME needs.

Capitalizing on customer trends, such as rising mobile wallet use among younger demographics, SMEs adopting faster and cheaper A2A payments could enhance the customer experience in competitive markets. With open banking adoption expected to rise gradually over the next three years, coordinated efforts to educate, simplify integration, and strengthen protections are essential to unlock the sector's potential.

1. The survey by The Payments Association reveals that the finance sector, particularly retail and healthcare businesses, display a significant interest in payments innovation such as open banking, with 58% and 66% respectively, acknowledging its potential to improve the customer experience.
2. To drive the adoption of open banking among UK businesses, The Payments Association suggeststhat the industry should strive to communicate benefits clearly and consistently, standardize language and terminology, address integration and security concerns directly, boost consumer education and engagement, and collaborate with regulators to clarify rules and provide greater functionality, including Variable Recurring Payments.

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