iGF Fintech Futures Series: The Truth About Open Banking
As the iGaming industry continues to transition further into the digital revolution, the potential merits of leveraging open-banking technology is an exciting prospect.
Many operators will be keen to find new ways to streamline the payments process, to save valuable time and money. However, with open banking still being a relatively new concept, how can operators ensure they are making best use of it – and seeing a significant return on investment going forward?
We spoke with Nick Tucker, Co-Founder & CRO for top fintech firm, Paytently. We drew on Nick’s wealth of experience as a payments sector leader, both inside and outside of iGaming.
Nick shared his views on the true value of open banking – and, most importantly, how the iGaming industry can leverage open banking to sustain growth well into the future.
Open banking has become a popular trend for iGaming in recent years. But with so many providers offering an open banking solution, how can operators be sure they are working with the correct supplier?
“The surge in open banking-initiated payments, fuelled by venture capital investments, has indeed expanded the supplier pool in the iGaming sector. When I started in the industry, only a handful of providers, such as Sofort and Trustly, were offering account-to-account payments. Fast forward eight-years, and there are over 25 providers in the market, each battling for a slice of the iGaming pie.
“Picking the correct provider for your business requires careful consideration. Key players like Trustly, which pioneered account-to-account payments in the Nordics and mainland Europe, have lost market share to emerging competitors. These new entrants include Brite, Zimpler, and Finshark in Sweden, Finland and neighbouring European markets. Truelayer leads in the UK, and has also made strides in France, Germany, the Netherlands and Spain. Furthermore, newer providers at their Series A or B funding stages–such as Volt, Nodapay, Vyne and Citizen–are also vying for, and making, solid strides in the iGaming market.
“When choosing a partner, five key factors need to be considered:
Licences: The open banking platforms, regulated as PISP/AISP, often with a PI or EMI licence, must comply with their local financial regulator, banking partners, and investors. Some providers (like Tink and Kevin) have chosen to bypass iGaming, pursuing lower-risk segments like e-commerce. Yet, most providers are open to working with iGaming operators, but the licence an operator holds often determines which country the provider will allow processing in.
Geographies: It is crucial to understand the geographical coverage of potential providers. If you operate in multiple regions, a provider offering local IBANs will increase conversion rates and avoid IBAN discrimination. Also, a provider that can help your cross border payments and manage FX exposure on a single back office interface is beneficial.
Bank Coverage: A provider’s bank coverage may seem comprehensive, but the performance can vary. Ideally, choose a provider that handles a high volume of transactions through each bank integration daily, for better and more reliable user-experience.
Value-Added Services: Established providers offer a broad product suite. These can range from payment initiation services, settlement accounts, comprehensive back offices, risk systems, payment guarantees and a variety of payout options.
Turnover: If open banking becomes a major payment method, consider multiple integrations for redundancy and keeping providers competitive on pricing.
“Regulatory scrutiny has increased, making it more challenging for operators, especially those with offshore licences or multi-jurisdiction EU licences like the MGA, Estonian, or IOM/GIB.
“Providers’ risk appetites and corresponding product offerings evolve over time, influenced by their growth, new investors, and their banking partners. Understanding these dynamics is crucial for an iGaming operator. Thorough evaluation based on the factors I mentioned can lead to a provider that meets the operator’s needs and can provide adequate support in this evolving industry.”
Open banking is a relatively broad term used across multiple different industries. What features do you think make the best open banking solution for the iGaming industry specifically?
“Open banking revolutionised the iGaming industry by providing a blend of secure payment initiation and beneficial data sharing. While payment facilitation remains a primary focus for operators, providers that integrate payments and data, crafting enriched products that minimise friction for both users and merchants, truly exemplify open banking’s potential.
“Noteworthy innovations, such as Trustly’s Pay N Play, transformed the iGaming landscape by offering a seamless deposit and registration solution. Forward-thinking providers are now developing more complex solutions, elevating the open banking experience beyond mere payment initiation. For example, Truelayer’s Signup+ has expanded this concept to the UK market, while companies like Zimpler and Cleo are extending similar services to Latam (Brazil/Chile).
“Another trend surfacing is the blending of payment solutions with e-money services. As more platforms acquire EMI licences, they can better address challenges around fund collection, payouts, FX, and treasury services, which significantly adds value for the operators.
“Looking to the future with the evolution of PSD3 towards open finance, there’s potential for open banking providers to address challenges in responsible gaming and anti-money laundering (AML). Traditional data providers like Experian or Equifax might innovate by offering solutions where players can link their bank accounts, sharing intricate insights into their financial lives. This would streamline processes for source of funds and wealth checks, ongoing KYC, highlight irresponsible gambling or vulnerable players, and allow for more precise identification of VIPs.”
What impact does an operator’s geo location have on the effectiveness of open banking products? Does it work better in some territories than others?
“The effectiveness of open banking products highly depends on an operator’s targeted countries. While traditional payment methods, like Visa and Mastercard, still have a significant presence in the UK and much of Europe, the popularity of bank transfers, account-to-account payments and open banking payments is increasing.
“For example, in the Nordics operators have adopted pay-and-play or instant registration models, which rely solely on open banking for deposits or payouts, essentially giving it 100 percent of the checkout share. In the newly regulated Dutch market, the combination of iDEAL and open banking covers about 90 percent of the checkout even without the instant registration aspect. Countries like Germany, Estonia, Spain, Latvia and Lithuania also feature open banking prominently, with a checkout share reaching up to 25 percent.
“In the UK, open banking is relatively new and players still tend to prefer card-on-file or Apple Pay, but adoption is growing as major brands like Flutter and Entain have begun to incorporate it. Operators report that open banking’s share of the checkout is approaching 10 percent in the UK and Ireland, a trend likely to continue as debit cards expire and incentives are introduced to encourage players to try open banking. Moreover, the ability to provide instant payouts via open banking is a compelling feature that encourages its adoption.
“France’s iGaming scene is expected to see a rise in open banking adoption, with Betclic recently introducing instant payouts. In the US, the popularity of guaranteed ACH methods built around open banking principles is increasing, and the trend will likely continue with the launch of FedNow. Brazil’s newly-regulated market is already witnessing the popularity of open banking with the success of PIX.
“On the other hand, open banking underperforms in countries where trust in banks is low or cash is preferred, such as Greece, Romania and Hungary. Furthermore, the quality of bank APIs in Portugal and Italy currently leads to a subpar user experience, resulting in minimal adoption of open banking.”
After speaking with Nick, it’s clear that the emergence of open banking has had a revolutionary impact on the iGaming industry in a relatively short space of time.
Although largely dependent on geo-location, this tech has the ability to eradicate friction for both the users and the merchants and is perfect for ambitious brands trying to scale up.
The exciting new innovations that are emerging within the open banking space are very, very encouraging.
They show the potential for this cutting-edge tech to elevate the banking experience beyond mere payment initiation. And they can supercharge our iGaming industry to help take it to the next level.