The future of open banking

After the Big Bang, Richard Newman at Open Banking Limited wonders what happens next for open banking

Following the Government’s recent commitments in the Autumn Statement and the recommendations outlined in the Future of Payments Review, which set out a national payments vision, the future is looking bright for open banking. 

With the Chancellor championing a ‘Smart Data Big Bang’, a major expansion of open data sharing schemes across the economy, the Autumn Statement saw the Government reaffirming its commitment to extend the benefits of open banking beyond payments (which reached a record high of 10.8m in August 2023) and current accounts into other financial services products, and additional economic sectors.

This ambition programme will unlock innovation, competition and benefits across seven industries, including energy, banking, finance, retail, transport, home buying and telecoms.

Open banking was effectively launched just five years ago in 2018, and the confidence shown in this nascent market by participants, users, regulators and government is testament to its success in such a short time. The market has grown significantly since it became a regulatory requirement, and is now valued at over £4bn, but there is still much to do to meet open banking’s full potential. So what lies next for this innovative technology? 

To understand this, we must remember how we arrived at our position today. 

With the UK at the epicentre of open banking innovation, the global achievements wouldn’t have been possible without the regulatory mandate and impetus to create the building blocks of the first Open Banking Standard. 

More than 11% of consumers now use open banking, and high-performing apps and dashboards now allow millions of consumers a clear view of all their finances in one place: combining incomes, mortgages and bills – enabling the easy movement of money and highlighting potential savings to ease the stress of mounting bills and rising costs. 

New payment schemes such as variable recurring payments (VRPs) for sweeping (a ‘smart Direct Debit’) are a popular, flexible and convenient way for consumers to manage bills and move money between their current and savings accounts – connecting authorised payment providers to their bank accounts to make payments for them. 

The UK’s 5.5m small businesses are also leading the way in open banking adoption. Seventeen per cent of SMEs now benefit from real-time insights on their cash flow, faster access to cost-effective lending, and even tackling late payments with embedded finance links in their accounting software. 

Open banking’s achievements continue to be seen across the industry, and beyond, and there is little to stop it from achieving more: from multinational corporations and public sector cost savings to first-time buyers and personal savers, this framework can deliver benefits to many UK citizens and organisations.

The Government’s Joint Regulatory Oversight Committee (JROC) set out its agenda in June this year to take forward recommendations for the next ‘phase’ of open banking. The Committee is due to publish its decisions on the future of open banking shortly – providing clarity and certainty to the market.

The Government also published its legislative plans for the future regulatory framework for open banking and other smart data schemes under the auspices of the Data Protection and Digital Information (DPDI) Bill. This legislation is currently going through Parliament and should achieve Royal Assent by Spring 2024.

With smart data heralded as the next big step for open banking, and its evolution into open finance, the speed at which the Treasury has embraced the potential of this innovation cannot be understated. The DPDI Bill will mean data is accessible and interoperable across economic sectors – for the benefit of all.

The Government’s commitment to moving open banking beyond a competition remedy could signal that the days of widespread financial exclusion are over.

Replacing an arcane, rigid system dependent on red tape, with a personalised and efficient experience based on consumers’ and businesses’ urgent and everyday needs will make open banking a true public good.

Richard Newman is Corporate Affairs Director of Open Banking Limited

Main image courtesy of iStockPhoto.com