State of Open Banking for Online Gambling: The UK vs. The Netherlands

The way payments work in online gambling is changing fast, especially with Open Banking making a big impact. It allows players to connect their bank accounts to their online casino accounts and make immediate and transparent payments through secure APIs. With direct transactions authorised from a player’s bank, Open Banking cuts out the middleman by dismissing the use of credit cards and e-wallets.

Meanwhile, casinos are permitted secure access to specific bank-held data, including customer account information and transactions. This speeds up KYC verification of identity as well as payment account ownership and operation, making transactions smoother and faster. Open Banking is also conducive to safer gambling as it allows casinos to assess players’ financial status more accurately to determine their eligibility to gamble.

Two countries at the forefront of this revolution are the Netherlands and the United Kingdom. This article compares the current state of Open Banking for online gambling in both countries.

Open Banking For Online Gambling in the UK

The UK leads Europe in Open Banking. Global data and business intelligence platform Statista reports that active users in the country soared from 1 million in 2019 to 8 million by 2023.

The reason, of course, is the increasing adoption of the technology by financial institutions in the UK. Here’s an overview:

A 2024 report by Open Banking Limited highlights significant growth in Open Banking adoption in the UK. By January 2024, 13% of digitally active consumers and 18% of small businesses in the country were using the technology. Comparatively, other European markets lagged with around 2% adoption. Moreover, penetration of Open Banking payments surpassed that of data usage in August 2023, reflecting a trend towards increased payment adoption.

Such payments surged to a record 14.5 million in January 2024, marking a 69% increase from the previous year. Of these payments, 8% were variable recurring, and 92% were single immediate transactions. Throughout 2023, there were 130 million Open Banking payments, up 90% from 68 million in 2022. These statistics also correspond to the rising adoption of Open Banking for online gambling in the UK.

The reason is simple: fast, hassle-free payments.

Resh Vamathevn, account executive at the FCA-regulated Open Banking platform, TrueLayer, says the technology allows operators to transform their online offering by enabling seamless and instant payouts to any account. No wonder an increasing number of the fastest withdrawal casinos in the UK now support Open Banking for payments.

However, according to fintech news site Finextra, growth in Open Banking payments in the UK is currently slowing. Growth can be sustained not only when more consumers use Open Banking but also when each user makes more payments. Where the number of users is seeing an uptick every month, the sizes of payments per user are flatlining. Ergo, the decline in growth. Finextra attributes the issue to the limited number of websites accepting Open Banking.

This is also true for licensed online casinos in the UK with Open Banking as a payment method. Not every site supports it. Nonetheless, the UK has been at the forefront of Open Banking adoption ever since its launch in 2017. For instance, the Competition and Markets Authority (CMA) and the UK Government mandated the nine largest retail banking providers to implement common standards for Open Banking in 2018.

Of them, 6 providers implemented the standards and are now being monitored by an independent Open Banking Implementation Entity (OBIE). So we can expect more and more licensed online casinos in the country to accept Open Banking as a payment method soon.

Open Banking For Online Gambling in the Netherlands

As per leading global payments and shopping service Klarna, banks in the Netherlands lead in offering the best customer experience. Dutch people enjoy reliable and user-friendly payment systems with high-quality bank data. Payments are straightforward, and any bank downtime is quickly resolved. This reliability ensures payments reach their destination safely without being rejected. This boosts merchant confidence, saving time and money for everyone involved.

Klarna also says the anti-fraud levels available are top-notch in both the Netherlands and the UK due to high-quality data. Examples include data involving account ownership and transaction history, which protect against impersonation and enable personalised services. Yet, Open Banking isn’t as widely adopted in the Netherlands as in the UK. This is despite the pronounced appetite of the Dutch for digital payments.

To understand why, we studied the 2023 report by Mastercard Data & Services. It highlights how the Netherlands ranks highest globally for trust in digital tools in the 2020 Digital Intelligence Index (DII). 90% of consumers are open to trying new financial management tools. 72% even prefer direct bank account payments. But, only 31% would use Open Banking if there are no fees, and a mere 3% would do so if fees were involved.

The popularity of iDEAL, the Netherlands’ Instant Payments network, seems to be a key factor. It enables account-to-account (A2A) transactions and is used by 40% of the population as their primary payment method. In 2022, it accounted for 70% of all Dutch eCommerce transactions. No wonder it is also the top choice for instant casino payment in the Netherlands.

Experts consider iDEAL a forerunner to Open Banking, allowing users to send funds directly from their bank without a card. Payments with it are fast (less than 10 seconds) and 2FA secure. However, iDEAL is country-specific, working only between Dutch banks within the Netherlands. Unlike open banking, it cannot be used for repeat payments like subscriptions, and websites must integrate it to offer it as a payment option. Most importantly, iDEAL doesn’t use an API to initiate a payment from within a user’s bank account.

This is where Open Banking stands out. It is more of a regulatory framework that lets third-party financial service providers scrape a user’s financial data from banks. It has a global scope: Open Banking is not limited to a single country, although no global regulatory body currently exists. Nonetheless, it has been implemented, regulated and standardised in various regions, including the European Union, the UK, Australia, and others.

Open Banking uses APIs to get to an account holder’s information and enable transactions. Fund movement is possible between banks across the Open Banking network, making it ideal for application to various sectors, including online gambling. However, the dominance of payment methods like iDEAL has subdued its adoption in the Netherlands. Dutch people find these payment methods more familiar and trustworthy, which is why Open Banking is yet to become a thing in the country.

Apart from such consumer-centric challenges, API standardisation remains an issue, too. Yet, a strong inclination towards digital payments suggests Dutch people generally feel comfortable sharing their financial data with third parties. The 2023 report by Mastercard Data & Services says 25% people expressed no concerns at all, creating a promising catalyst for future Open Banking adoption in the Dutch market.

Legislation could also cause an uptick. New European rules require payments within the Eurozone to be completed in under 10 seconds starting February 2024. This will standardise real-time payment systems and push Dutch banks to adopt consistent Open Banking standards. It will not only unify how they handle and communicate payment outcomes to merchants but also address past inconsistencies and improve overall payment efficiency in the Netherlands.

But, we also have to keep in mind that the Netherlands legalised online gambling only in 2021, prioritising channelisation of players to licensed casinos. While the number of licensed operators is steadily increasing, it is yet to boom. This also explains the poor adoption of Open Banking compared to other familiar payment options like iDEAL, which serve the same purpose for players—fast transactions. Despite these hurdles, Open Banking adoption in the Netherlands is moving in the right direction.

Here’s an overview:

The Stark Contrast

The UK and the Netherlands offer contrasting approaches to the adoption of Open Banking for online gambling. While the UK presents itself as an eager and early adopter, the Netherlands seems to counter with alternatives. We must also keep in mind the slow growth of Open Banking in the UK and the freshness of online gambling in the Netherlands.

But come what may, Open Banking will play a crucial role in improving player experience and promoting responsible gambling as the iGaming industry evolves. Operators who embrace the technology will be well-positioned to stay ahead of the regulatory curve and succeed in the long run.