Booming Open Banking adoption: the UK hits 5 million customers benchmark

By Puja Sharma

Open Banking promises to create a new data-sharing infrastructure, which will form the basis of a much richer range of services and products across the whole of financial services, and critically, in other industries as well.

According to data provided by the CMA9, the 9 banks and building societies mandated by the CMA Order to implement Open Banking in the UK, there are now more than 5 million active users in the region. In January, more than 4.5 million people and businesses used these services in the country after PSD2 made it a regulatory requirement.

Rapid expansion

It took 10 months in 2020 to grow the number of users from 1 million to 2 million, but just four months to grow from 4 million to more than 5 million, demonstrating the increasing appetite for Open Banking-based services from consumers and businesses. Comparatively, it has taken just four months for it to grow from 4m to more than 5m, demonstrating the interest consumers and small businesses have in using open banking services to move, manage, and make the most of their money.

Compared to December 2021, nearly 625,000 payments were made in January 2022. The HMRC’s inclusion of the ‘Pay by bank’ option into its annual self-assessment process played a significant role in this payments growth, which increased the total number of payments made via open banking to 3.86m in January 2022. This represents an increase of 19.3% over December 2021.

Open Banking in the EU and UK may have started, principally, as a way to promote competition in the payments and the banking industry. But it is clear now that its impact is much broader. Open Banking promises to create a new data-sharing infrastructure, which will form the basis of a much richer range of services and products across the whole of financial services, and critically, in other industries as well, according to a report by Deloitte.

Great benefits and new challenges

There is the possibility that fragmented API & data standards of today will unify into one common standard, potentially Berlin in the EU and/or the OB standard for the UK and Ireland. This may come about due to regulation, or incentivising banks to standardise how they comply with PSD2 and OB. But in the meantime, businesses that can roll out innovative solutions at scale across Europe will gain all the first-mover advantages of market share and iterating quickly on their products.

“The figures released today by the OBIE show the remarkable progress made by the industry over the past four years to make Open Banking a success in the UK. Reaching 5 million users is a testament to the ongoing innovation and collaboration of Open Panking products and service providers, and the vibrancy of the ecosystem – and it’s still only the start of the open finance journey, Karl MacGregor, Co-Founder and CEO at Vyne, a specialist account-to-account payments platform, commented.

Payments are particularly fertile ground when it comes to Open Banking. “Payments made through Open Banking are more cost-effective, transparent, and seamless, benefitting both consumers and merchants,” he added.

Similarly, Jordan Lawrence, co-founder, and CCO at open payments gateway Volt, said: “Cards have long-established a monopoly, so it was always going to take time to convince merchants and consumers of the benefits of Open Banking-based account-to-account payments. But as these new statistics show, the message is now very much getting through.”

There are smaller issues worth exploring when it comes to speed of deployment: consumer understanding of Open Banking arguably needs further focus, as does the quality of banks’ PSD2 implementations. But these are merely teething problems that are being quickly solved by FinTechs – often working in partnership with banks.

“We see globalisation as the next key challenge. While the infrastructure underpinning Open Banking payments is global, it can also be disparate. Harmonising these implementations and making them interoperable is a key focus for our firm. All the signs of service payment success are there: regulators are behind them, banks are investing in technology, and now – as we can see from the 5 million-user milestone – consumers are convinced of their benefits,” Lawrence added.