Comparing Authorisation Success rates between Open Banking, Digital Wallets and Card Payments

Analysts analyzing financial charts in office

Comparing Authorisation Success rates between Open Banking, Digital Wallets and Card Payments

Comparing Authorisation Success rates between Open Banking, Digital Wallets and Card Payments. In the rapidly evolving world of digital payments, various methods have emerged to make transactions smoother, faster, and more secure. Open Banking, Digital Wallets, and Card Payments are three payment solutions that continue to gain popularity as they cater to the needs of customers and businesses alike. Understanding and comparing their authorisation success rates is crucial to determine the efficacy of each method, leading to informed decisions in the financial industry.

Open Banking is a revolutionary approach that utilises Application Programming Interfaces (APIs) to facilitate seamless financial transactions between banks, businesses, and customers. Digital Wallets, on the other hand, store payment information electronically, allowing users to make payments quickly and securely through connected devices. Meanwhile, traditional Card Payments represent a familiar payment system using manual input methods, primarily through debit and credit cards.

By examining the authorisation success rates of Open Banking, Digital Wallets, and Card Payments, we can identify their current performance and determine the factors affecting the efficiency and effectiveness of these payment methods. This insight ultimately helps optimise systems and achieve a seamless transactional experience for all parties involved.

Comparing Authorisation Success Rates

Open Banking

Open Banking is a secure way to give providers access to financial information, enabling the creation of innovative financial products. It tends to have higher success rates compared to both card payments and digital wallets. One reason for this is that Open Banking payments are designed for digital and mobile environments, making the payment process less manual and success rates higher. They have been known to convert up to 40% better than cards. Since Open Banking transactions are carried out in real-time and directly between banks, there are fewer declined transactions.

Digital Wallets

Digital wallets offer a convenient and secure way to make payments using a mobile device. They utilise technologies such as Near Field Communication (NFC) and QR codes for contactless transactions. Digital wallets like PayPal enable industry-leading authorisation rates through strategies such as network tokenisation and data science, leading to increases in approval rates. However, these rates may still be lower than those in Open Banking due to the reliance on card networks for transaction authorisation.

Card Payments

Card payments, including credit and debit card transactions, are widely used for both online and in-store purchases. However, they tend to have lower authorisation success rates compared to Open Banking and Digital Wallets. Factors contributing to declined transactions include incorrect card details, insufficient account balance, and transaction limits.

A shift towards debit card spending (72% share) over credit cards has been observed between January and May 2020, partially due to higher limits for contactless payments. Nevertheless, card payments are still lagging behind Open Banking and Digital Wallets in terms of authorisation success rates.

To summarise, authorisation success rates vary between Open Banking, Digital Wallets, and Card Payments, with Open Banking generally having the highest success rates, followed by Digital Wallets and finally Card Payments. Each method offers different advantages and challenges, and their success rates are influenced by the technology, real-time capabilities, and security measures employed.

Factors Affecting Authorisation Success Rates

Consumer Behaviour

Consumer behaviour plays a crucial role in authorisation success rates. Various factors affect consumer decisions, such as their propensity to use digital payments, their choice of payment method, and their trust in the security and reliability of open banking. The adaptation and acceptance of app-based banking and digital wallets by consumers directly impact authorisation success rates. Consumers who are more comfortable with digital and open banking platforms are more likely to have successful authorisation transactions, as they complete the required authentication steps correctly.

Fraud Prevention

Fraud prevention and Anti-Money Laundering (AML) measures can influence authorisation success rates. Banks and payment service providers invest heavily in obtaining real-time transaction information and using machine learning algorithms to detect patterns indicating fraudulent behaviour. While these efforts help to protect consumers and merchants, they sometimes lead to a higher rate of declined transactions due to false positives. This can have an impact on the overall authorisation success rates.

Regulations and Infrastructure

The evolving regulatory landscape and the infrastructure supporting payments play a significant role in determining authorisation success rates. Regulations for open banking and digital wallets, such as Strong Customer Authentication, offer enhanced security measures while potentially increasing transaction complexity. This could impact success rates if systems and infrastructure must be regularly updated to maintain compliance.

Fintech companies are actively participating in developing new payment infrastructure, like the Faster Payments service. This helps improve authorisation success rates by providing secure and efficient payment channels that are increasingly digital and integrated with banks and other financial institutions.

Payment Method Technologies

The technologies supporting different payment methods, such as open banking, digital wallets, and card payments, play a crucial role in determining authorisation success rates. Companies that invest in improving the security and usability of their payment platforms can boost their authorisation success rates. For example, leveraging biometric authentication in digital wallets can enhance both security and the user experience, which could lead to higher authorisation success rates.

Moreover, banks’ and payment providers’ investment in technology, like machine learning and artificial intelligence, has the potential to increase authorisation success rates. These technologies allow companies to analyse vast amounts of transaction data and make smarter decisions about authorisations based on patterns and trends, ultimately leading to better customer satisfaction and revenue generation.

Impact of Authorisation Success Rates on Businesses and Consumers

Revenue and Transaction Fees

Authorisation success rates have a direct impact on businesses’ revenue. Higher success rates in payment methods like open banking, digital wallets (e.g., Apple Pay), and card payments lead to more completed transactions, which in turn generate higher revenue for businesses. In addition, transaction fees for different payment methods vary, which affects businesses’ costs. For instance, open banking transactions often have lower fees than card payments, making them a more cost-effective option for businesses.

Customer Experience

The authorisation success rates of different payment methods also influence the overall customer experience. When a customer’s preferred payment method, such as a mobile-based digital wallet or bank account, has a high authorisation success rate, transactions are more likely to be smoothly processed without issues like insufficient funds or delays. This leads to a more seamless and enjoyable shopping experience for consumers, fostering customer loyalty and positive word-of-mouth.


Conversions are crucial for businesses, as they indicate successful purchases made by customers. By offering payment methods with high authorisation success rates, businesses can increase their conversion rates and overall sales. For example, a seamless checkout process that incorporates successful mobile or card payments can boost consumers’ willingness to complete a purchase, ultimately benefiting the business and increasing its revenue. Moreover, utilising tools like account updater services can help increase authorisation success rates by keeping customers’ payment information up to date.


Authorisation success rates can also play a role in determining a customer’s creditworthiness. Higher success rates for a given payment method indicate that a consumer is more likely to have the necessary funds in their accounts to cover their purchases. Consequently, businesses, banks, and other financial institutions can use this data to evaluate the potential risk associated with a particular customer. This information can then be utilised to make more informed decisions related to lending, credit lines, and other financial products.

Emerging Trends and Innovations

In the world of payment authorisation, a number of emerging trends and innovations are shaping the future landscape. This section will explore developments within real-time payments, digital assets and cryptocurrency, buy now pay later (BNPL) initiatives, artificial intelligence (AI), and the Internet of Things (IoT).

Real-Time Payments

Real-time payments are gaining traction, with increased demand for instant funds availability and improved user experiences. Systems such as Faster Payments in the UK, and the forthcoming FedNow in the US, offer immediate transfer of funds between accounts. Payment service providers like Stripe are playing a crucial role in facilitating real-time payments, offering multiple routing options and funding sources for businesses to provide a seamless experience for their customers.

Digital Assets and Cryptocurrency

Cryptocurrencies and digital assets are becoming more widely accepted payment options, opening up new markets and creating opportunities for businesses and investors. Companies like Mastercard are actively investing in the development of products and services to support the use of digital assets in retail and online transactions. Regulatory initiatives are also underway to ensure a secure and transparent environment for digital asset transactions, fostering trust and driving adoption.

Buy Now, Pay Later

The BNPL industry is growing rapidly, providing consumers with greater flexibility in payment options and retailers with increased conversions. Providers like Klarna and AfterPay are gaining significant market share, as they allow shoppers to split their payments into smaller instalments or defer payments. These offerings are becoming increasingly popular, especially in emerging markets, where consumers are looking for alternative financing solutions to traditional credit cards.

Artificial Intelligence

AI has the potential to greatly impact the payment industry by improving fraud detection, enhancing risk management, and streamlining processes. For instance, machine learning algorithms can quickly analyse vast amounts of transaction data to identify patterns and anomalies indicative of fraudulent activity. This enables payment providers and financial institutions to take proactive measures to minimise risk and protect their customers.

Internet of Things

The IoT is enabling a new era of connected devices, from smartphones to wearables, that can facilitate payments with ease. Integrating payment capabilities into everyday items is expected to improve the customer experience and drive further adoption of digital wallets and contactless payment methods. As open banking continues to gain momentum, connected devices will likely play a crucial role in delivering innovative financial products and services enabled by seamless data sharing.

Regional Perspectives and Regulatory Changes

Middle East

In the Middle East, governments and financial institutions are embracing the digital transformation of the banking sector. This shift is evident in their support for open banking initiatives, digital wallets, and card payment technologies. As a result, local and cross-border payments have seen improvements in authorisation success rates. Factors such as significant investments in digital infrastructure and collaboration between banks, fintechs, and technology companies have contributed to this success.

Government and Financial Institutions

Governments and financial institutions play a significant role in driving open banking, digital wallets, and card payment adoption. Regulatory changes aimed at fostering financial inclusion, competition, and innovations have been instrumental in this development. For instance, new open banking regulations allow customers to share their financial data, creating opportunities for third-party providers to offer tailored financial services. This enhances the authorisation success rates for transactions made through multiple channels, such as digital wallets and card payments.

Tech Companies and Innovations

The involvement of tech companies in the banking sector has expedited innovations in payment systems. This includes developments in digital assets, buy now pay later (BNPL) platforms, and insurance offerings. The continuous rise of fintech startups has also spurred advancements in payment technologies, leading to an increase in authorisation success rates across various methods, including open banking, digital wallets, and card payments.

QR Codes and Payment Rails

QR codes are becoming an integral part of digital payment systems, providing a seamless and efficient way for consumers to pay for goods and services. As a result, payment rails have evolved to accommodate the growing use of QR code payments in open banking, digital wallets, and card payments. The implementation of QR code payment technologies has enhanced both local and cross-border payment processing, leading to higher authorisation success rates.

Frequently Asked Questions

What are the common success factors in authorisation for payment methods?

There are several factors that contribute to successful authorisation for various payment methods. These may include secure and efficient transaction processing, the presence of robust fraud detection and prevention measures, user-friendly interfaces, and seamless integration with existing payment ecosystems.

How do authorisation success rates of digital wallets compare with card payments?

Digital wallets such as Apple Pay have shown strong authorisation success rates at around 94%. In comparison, the success rates for card payments may vary significantly depending on the issuer, the type of transaction and the merchant involved. Generally, digital wallets have a slightly higher authorisation success rate due to their design for digital and mobile use.

What are the advantages driving these comparisons?

Digital wallets offer convenience and security, one of the primary reasons being the integration of multiple payment methods into a single platform. Additionally, digital wallet-based transactions are predicted to grow globally, accounting for more than half of all e-commerce payments worldwide by 2024. On the other hand, open banking payments tend to settle more quickly (instantly, compared to 1-3 days for card transactions) and have higher conversion rates.

Do open banking success rates outperform card payments?

Yes, open banking payments have been observed to have higher success rates than card payments. They convert up to 40% better than cards due to their digital and mobile design, which enables a more seamless, less manual process.

What challenges do digital wallets face in terms of authorisation success rates?

Some challenges faced by digital wallets include maintaining a balance between security and ease-of-use, battling the perception of higher risk, and ensuring compatibility with different devices and payment systems. Furthermore, the broad range of digital wallet solutions available in the market makes standardisation difficult.

How does user adoption impact authorisation success rates of various payment methods?

User adoption plays a significant role in determining the authorisation success rates of payment methods. As more users become familiar with and adopt specific payment options, it may lead to an increase in successful authorisations. However, a crucial aspect here is ensuring users understand the benefits, security measures and proper usage of these payment methods.

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