The UK financial sector in suspense

Open Banking in the UK has quietly become an unsung hero. While the road it has covered following its launch in 2018 has sometimes been rocky and progress has not always matched early expectations, eight years on we are at a milestone that calls for celebration and a new chapter to begin.

 

At its core, Open Banking enables consumers to share their bank account data securely with third-party providers to access more personalised, cost-effective financial services. It was designed to increase competition, which the pre-2018 market was woefully deficient in. Mandating the nine largest banks to open up data to technologically advanced newcomers was intended to challenge entrenched incumbents.

 

From the fintechs’ perspective, Open Banking provided access to precious banking data that they could harness for innovation. The resulting arrangement was intended to benefit consumers through a wider variety of intuitive and more personalised services.

 

The best technology is the kind you don’t even notice

 

Although more than 16 million people had used Open Banking services in the UK by the end of 2025, public awareness of the transformative infrastructure behind those services remains low.

 

This is partly down to the absence of a marketing-focused mindset where, for example, account-to-account payments – the service with the most disruption potential – is referred to by different names at online checkouts. Indeed, Open Banking underpins many widely adopted services: BNPL, alternative credit scoring and embedded insurance for example.

 

KLARNA, a global BNPL provider, set up its proprietary Open Banking platform in 2019 in line with open banking legislation – the EU’s PSD2, which the UK also adopted as a member and which provided the foundation for the UK’s post-Brexit Open Banking initiative too.

 

Open Banking’s impact is particularly visible in lending. Affordability checks have become faster and more inclusive. As lenders increasingly rely on bank account and transaction data to get a more granular and dynamic view than credit scores allow, they can assess credit risks more precisely and lend to a wider pool of borrowers as a result. 

 

A major milestone

 

In 2026, the multi-phased Open Data Strategy is about to reach one of its most important milestones. With 17.51 million active user connections, 2 billion API calls per month and an ecosystem of 145 authorised third-party providers, the infrastructural foundations for moving on to the next stage are firmly laid.

 

According to OBL, the open banking implementation company (formerly the OBIE), this year marks the transition from a regulatory framework to a commercial one, where data sharing will extend beyond banking into pensions, insurance and investments, while also streamlining consumer credit and loans processes further.

 

The reshaping of the financial ecosystem along the principles of open banking involves some new challenges. Unlike banking, the broader financial sector is more fragmented and less standardised.

 

The upgrading of legacy systems to enable real-time data sharing and compliance is expected to impact bottom lines considerably. Creating API connections with enterprise-grade security will also require a huge and concerted cross-industry effort.

 

Success will depend on whether institutions are able to view these changes as opportunities rather than obligations.

 

But open finance is certainly not a solution searching for problems. Similarly to how Open Banking is addressing genuine problems such as high bank card fees, prohibitive remittance costs and poor customer experiences, open finance also has the potential to resolve some long-standing pain points.

 

Take pensions. Fragmentation has left around 1.6 million pension pots worth nearly £20 billion unclaimed. Open finance can enable dashboards that consolidate various pension pots into a single view, giving users greater control, much like account aggregation has done in banking.

 

Open finance solutions could also help insurers combat the age-old problem of insurance fraud by cross-referencing customer transaction history to detect inconsistencies in real-time, while also allowing insurers to better assess risk and extend coverage to previously underserved groups.

 

Improving SMEs’ access to credit is another top priority of the open finance initiative. By allowing lenders access to their real-time cash flow data and accounting records, smaller businesses who faced difficulties getting a loan under traditional models may become eligible.

 

The next step

 

Open finance is affecting a much larger swathe of the UK economy than Open Banking has.  It will give the less digitalised part of the sector some formidable homework in order to modernise while also creating opportunities for fintechs, API infrastructure providers, aggregators and payment processors to increase their footprint.

 

The golden rule of first-movers reaping most benefits will apply in this case too. Companies poised to jump at the opportunity as it presents itself will have a chance to get ahead of those regarding the new regime as a compliance exercise.

 

The FCA is scheduled to release its Open Finance Roadmap by the end of March, outlining the stepping stones leading to full implementation in 2030. It will also mark an institutional shift, with OBL transitioning into a new independent, not-for-profit entity known as the Future Entity.

 

SMEs, the focal point of the upcoming regulations, however, shouldn’t wait for the publication of the roadmap with bated breath. Instead, they should prioritise digitising their data and digitally transform their processes, as well as explore how controlled data-sharing can work to their advantage.