The United Kingdom’s open banking experiment began with high hopes and hard lessons. Adoption has grown steadily, with millions of U.K. consumers now sharing bank data with trusted third-party providers to access budgeting tools, faster payments and credit offers.
But the road from concept to widespread use, where data released earlier this month indicates 15 million users, was far from smooth.
“Open banking … has two features that distinguish it from some other concepts,” said Dr. Bill Roberts, fellow at the Cambridge University Judge Business School and former head of open banking at the U.K.’s Competition and Markets Authority (CMA).
As he elaborated in an interview with Competition Policy International (CPI), a PYMNTS company, “The first concept is data sharing. … The second part of it is basically payment initiation. … If you put those two functions together, you can generate applications and functions to help consumers in lots of different ways, and small businesses, too. So it’s a powerful tool to put people back in control of their own data.”
Early Missteps and Incentives
Beyond the promise of open banking lies its implementation, of course. Roberts emphasized that the U.K.’s mandatory approach was shaped by a concentrated banking market, as the four biggest banks account for about 85% of the financial services market. That’s a significant difference from other countries, like the United States, where the largest participant (JPMorgan) has a percentage point share in the teens.
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In the U.K. the CMA specified which banks were covered and mandated common API standards, but “probably the biggest mistake we made was over what to leave in the competitive space,” Roberts said.
Regulators assumed banks would create a seamless authentication process, but that assumption amounted to what Roberts called a “big mistake, because of course, they didn’t have that incentive. This was the yellow brick road to their competitors,” he said of the data sharing mandates.
As a result, and amid friction-filled user experiences, customers faced multiple click-throughs and popups that Roberts said warned people “that they’re about to do something very dangerous,” along with one-time passwords and security questions. “We probably lost six months on that process before we said … we need to have some standards here,” he told CPI.
Roberts stressed the importance of understanding incentives of all stakeholders in the open banking ecosystem.
Regulation vs Market Forces
The U.K.’s top-down approach suited its market structure, but Roberts cautioned that other countries must tailor their methods. “If the point of you introducing open banking is to fix a competition problems,” regulators would better advised to use legal powers than to rely on market forces, he said. “There’s no one right single answer to this. It all depends on what the circumstances are in the jurisdiction that you are regulating.”
He likened regulatory strategy to teaching a child to ride a bike: “You start out, you put stabilizers on … then as [stakeholders] get confidence … maybe you can take the stabilizers off.” Regulators can begin with mandates, then “as third-party providers get greater power … maybe you can change your approach as the ecosystem evolves.”
Be Clear on Objectives
Roberts urged regulators to define their goals before committing to open banking. “Be very, very clear. What’s the problem you’re trying to fix? Because open banking may not be the best answer,” he said. For financial inclusion, for example, open banking only works when a significant percentage of the country has bank accounts.
For countries such as the United States, there is some read across from America’s fragmented banking market, with thousands of institutions and no single dominant player, may require a lighter regulatory touch than the U.K. Yet, Roberts’ warning about incentives still applies: “If you are dealing with a market that’s not well functioning, then it is not a right answer to use market forces.”
U.S. regulators may need to set baseline standards for data sharing and authentication to avoid the costly delays the U.K. faced. Emerging markets, meanwhile, might first focus on building digital ID systems and broadening bank-account access before attempting a full open banking rollout (India, he said, has had success along that path).
Other jurisdictions can also draw from the U.K.’s mix of competition and collaboration. In Latin America, for example, Brazil has already moved from a tightly defined payments focus to insurance, adapting the “stabilizers on, stabilizers off” model Roberts described. Smaller nations, from the UAE to New Zealand, can calibrate their frameworks to local market concentration, ensuring that mandates do not stifle innovation but still give new entrants a fair shot.
Big Tech, AI and the Future
Big Tech will shape the next phase of open banking, he told CPI. “In the U.K., uniquely Apple is using open banking technology in its wallet,” Roberts said. “Anything which gave the bank something to think about, I would welcome hugely, because they are in a very, very powerful position.”
Artificial intelligence (AI) adds another dimension. Roberts described experimenting with AI for smart data applications: “If you just imagine the power, particularly AI getting hold of real data … then you have the capacity to provide bespoke advice. Now that’s a huge amount of power there for good and for bad.” Proper guardrails, he said, are essential.
Lessons for the US and Beyond
For regulators and market participants elsewhere, Roberts’ advice is straightforward: “Look what’s happened elsewhere. Learn from regulators in other countries. … Look at what’s worked, look at what hasn’t worked, and try not to do that.”
As U.S. policymakers craft their own open banking framework, the U.K.’s experience underscores the need to balance market-led innovation with early, clear standards and to anticipate both competitive dynamics and customer experience hurdles. With Big Tech entering financial services and AI promising personalized insights, open banking’s next chapter will be written globally, and will be informed by the U.K.’s own journey.
