Over two million Brits using open banking

The number of people using open banking functionality has doubled in the last six months, with more than two million using the digital tools to personalise their banking services.

Open banking rules such as the UK’s, introduced in 2018, and the EU’s Payment Services Directive 2 are designed to inject competition into the banking sector through the use of technology and data.

The Competition and Markets Authority’s (CMA) open banking regulation created an open application programming interface (API) in banking to give consumers more control over accounts. Through open APIs, third parties and multiple finance firms can use a consumer’s data to recommend the best service, including bank accounts.

These include multi-account visibility with account aggregation, and increased access to credit because banks and credit providers having access to banking transaction data enables them to make more informed lending decisions. Access to mortgages is also simplified by removing the need to send physical bank statements to mortgage providers.

But converting people into users of open banking is a slow process, with challenges in explaining the benefits and, because it requires sharing data, reassuring users of their security.

But things are accelerating, according to data cited by the Open Banking Implementation Entity (OBIE), which was set up by the regulator to drive open banking implementation and adoption. It said there are now about two million open banking users in the UK.

The data was provided to OBIE by the UK’s nine largest banks – Allied Irish Bank, Bank of Ireland, Barclays, Danske, HSBC, Lloyds Banking Group, Nationwide, RBS and Santander. It revealed that open banking functionality is being used by people to help them understand their spending, save, and access cheaper credit.

“Open banking used to be the best-kept secret in financial services,” said Imran Gulamhuseinwala, trustee at the OBIE. “With two million active monthly users and growing strongly, that is clearly no longer the case. We can now see that people want to exercise their rights over their data and will do so, as long as you make it simple and secure.”

According to a recent survey of 2,000 people carried out by Opinium for global innovation foundation Nesta, 36% of people now feel more comfortable using banking and money management apps and 23% trust online banking more since the coronavirus lockdown.

“With many struggling financially, the use of these apps is important to help people make the most of their money,” said Nesta.

Bill Roberts, head of open banking at the CMA, which introduced the UK’s open banking rules in January 2018, said open banking forced banks to allow customers to get more out of their own data.

“When the CMA investigated retail banking, we found banks were not working hard enough for consumers, and so we required them to give people control of their own data,” he said. “By doing so, we believed this would unleash a wave of innovation and stimulate rivalry.

“The fast growth in personal customers and small businesses using open banking during 2020 is another important milestone towards that goal.”