On the second anniversary of open banking in the UK, what’s next?

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Verdict | Ellen Daniel | Jan 13, 2020

open banking image2 - On the second anniversary of open banking in the UK, what’s next?Open banking was first launched in January 2018 and received much attention from the financial community as the potential bringer of fintech disruption.

The regulations require UK-regulated banks to share their customers’ financial data (with permission) with third party providers through the use of application programming interfaces (APIs) in order to make it easier for customers to access financial services and for TPPs to develop new products.

Today marks open banking’s second anniversary and while it has impacted the financial landscape, prompting incumbent banks to adapt to innovation and opening up new opportunities in terms of consumer experience, some have argued that the regulation is yet to live up to expectations.

See:  Open Banking in the UK: what’s happened so far

Banks had until March 2019 to establish a “sandbox” environment that third party providers could access and use to test products and until June to make their APIs available to third parties, but many European banks have not adequately met key deadlines, stalling innovation. Although many traditional banks are now adhering to open banking regulations, more could be done to ensure that they also benefit from the new landscape in terms of their digital services.

It can be argued that this, along with a lack of awareness, has meant that many are yet to reap the benefits of open banking. According to predictions by PWC, 64% of adults will use open banking technology in some way by 2022, but YouGov research from 2018 indicated that 72% of adults had not heard of open banking.

This is also the case for many businesses, with new research from the Federation of Small Businesses finding that 65% of small firms would not share their banking data with other financial services providers electronically, with the majority those not currently sharing their data “wary” about doing so in the future.

Open banking anniversary: “Meaningful change takes time”

Tim Waller, partner at law firm TLT LLP explains that one of the results of open banking has been a decline in account switching:

“Commentators have recently observed a decline in the number of banks incentivising current account switching, and have argued that one of the effects of open banking has been to make it less necessary to switch personal current accounts. These same commentators argue that the clearing banks are now working harder than ever to interact with customers through new digital channels that can ‘talk to’ their traditional current accounts.

“In addition, these new digital wrappers are only going to become faster and more powerful as 5G is rolled out in the UK over the course of 2020, which is good news for customers and the development of open banking in traditional banks, challenger banks and fintechs alike.

“A real difference in how businesses are dealing with open banking”

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Martin Buhr, CEO and Founder at Tyk, believes that open banking will open up more opportunities for smaller organisations to take on larger financial institutions:

“Open banking not only opens up opportunities for faster, better and more useful banking for existing and challenger banks, but also opens up a wide field of highly-specialised single-service opportunities to innovate beyond the scope of traditional banking services. By finally adopting service-oriented and API-first principles, banking has properly joined the information age.

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