What Next for UK’s 6.5M Open Banking Users?

The U.K. today counts 6.5 million active users of open banking-powered technology.

In a recent statement announcing the news, the country’s Open Banking Implementation Entity (OBIE) added that there were 7.5 million open banking-powered payments in the U.K. as of December 2022.

This milestone comes five years after open banking was made a regulatory requirement in the country under the European Union’s Second Payment Services Directive (PSD2).

That piece of legislation, implemented when the U.K. was still a member of the European Union, gave banks a mandate to share customer account information with authorized non-bank third parties. To enable this, PSD2 required financial institutions (FIs) to create application programming interfaces (APIs) through which payment initiation and account information requests can be made.

These requests, known in the industry as API calls, enable the flow of data between banks and FinTechs upon which today’s open banking ecosystem has been built.

Overall, open banking payments have witnessed sustained growth in recent years. From an average of just 24,800 per day in November 2020, OBIE data shows that in November 2022 there were an average of 239,800 successful open banking payments each day.

And with usage on the rise, the U.K.’s Competition and Markets Authority (CMA) announced this month that the nation’s six largest banks — part of the nine largest current account providers in the U.K. or CMA9 — have all completed the open banking requirements as laid out by the CMA’s 2017 roadmap.

As for the three laggards — Allied Irish Bank, Bank of Ireland and Danske — the CMA said that it “will consider enforcement action as appropriate to ensure [they complete the roadmap] in a timely way.”

The Future of Open Banking in the UK

With the OBIE’s job now essentially done, the U.K.’s banking sector is looking to the next stage of open finance, in which a new authority will succeed the implementation entity.

As outlined in a recent statement made by the multi-regulator Joint Regulatory Oversight Committee (JROC), the new authority will have responsibilities to the broader open banking ecosystem. As such, the funding and organizational model of the OBIE, which was created by the nine banks initially ordered by the CMA to make changes, is unlikely to suffice.

And while it demonstrated an intention to build on the gains of the last five years, the absence of any real direction in the JROC statement left many FinTechs demanding more concrete details about its plan for the future of open banking in the U.K.

In a letter to the Financial Conduct Authority (FCA), a group of leading British FinTech firms including Monzo, Moneyhub and Wise, criticized the regulator for lack of direction and clarity.

The letter, partly published in U.K. newspaper City AM, said that the December’s statement “did little to assuage our concerns that the integrity and potential of open banking is at risk” and called for the JROC to publish “clear directions and timelines for the continued enforcement of Open Banking in 2023 and beyond as a matter of urgency.”

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