Open Banking and the Technocracy
For a long time the UK was the world leader in open banking. But other countries have quickly played catch up, writes Chris Sweeney, CEO of Fiinu.
Since Rishi Sunak became Prime Minister in October 2022, he has spoken at length of his desire to turn the UK into a science and technology superpower.
This includes the creation of a new science, innovation and technology department and a £370m fund for policies designed to boost investment into these areas.
Sunak has also, in the past, been a keen supporter and champion of fintech in the UK, speaking at events and introducing policies designed to help the sector.
Certainly, there is a long way to go in achieving this goal of making the UK a “technocracy”, a leader in science, technology, and finance, but if there is one area that could soon be world leading, it might well be Open Banking.
Since the UK pioneered the idea of Open Banking in 2017, ordering the nine biggest retail banking providers to open up customer data using secure data protocols, the sector has grown rapidly, reaching over six million users of the technology in the UK alone and millions more in countries that have since adopted it.
For a long time the UK was the world leader in this technology, and it still boasts hundreds of companies making use of the legislation to provide consumers with innovative tools. Since then, however, other countries have gone further, creating an environment where we could soon be playing catch up.
If Rishi Sunak is going to deliver on his promises, there are a number of areas to consider implementing in Open Banking. While the government has announced that the initial roadmap is now “substantially complete” with six of the UK’s leading banks now implementing the technology. It is clear, however, that it can be expanded further, to more lenders and a more all-encompassing view of the UK banking sector.
As well as this, Open Banking has significant scope to be expanded to other financial services such as investments, savings, mortgages, credit and pensions. Each of these areas could provide another potential avenue of innovation, job creation and ideas for export. There has been a myriad of businesses, fintech and even potential unicorns that have been born from Open Banking, a similar boom could come from opening up other areas.
All of this would have to be done in a responsible and secure manner, of course, but what the UK cannot afford to do is fall behind other countries who are willing to be bolder or move faster. Countries such as Brazil and Australia have taken significant steps in Open Banking and while it can be useful to learn from others, leading this conversation should be something that the UK is working toward.
Throughout history, it has been the pioneers and innovators that benefit most from new technologies and inventions with opportunities presented to those that have built up the experience needed at home. This has often been cited as one the reasons that the UK should perform better on the export market than perhaps it does.
The UK is a developed market where competition is fierce so companies that thrive here should be on a fantastic platform to succeed globally, creating jobs, paying taxes and boosting the UK economy and claim on its ‘tech superpower’ status. The wider impact of a thriving and world-leading Open Banking on the UK’s economy and tech sector is hard to measure directly, but the innovations that could come from it have threatened for a long time to be on the cusp of revolutionising everything from payments to money management.
Areas such as account-to-account transactions could drastically change the ways that small firms and retailers do business, cutting out hefty transaction fees and a significant loss of income for them, empowering the consumer and business alike. This has obvious benefits for the UK’s SME ecosystem, making entrepreneurship more attractive, and potentially encouraging what has been known for years as a “nation of shopkeepers” although the shopkeepers of the future will be using cutting edge technology.
Sweeping and Variable Recurring Payments (VRPs) could also have a significant impact on the finances of businesses, allowing them to earn interest on the billions that businesses currently sit on.
These are just two examples of the ways in which Open Banking may soon impact the wider economy, but by opening these up further, there is more potential for a transformative effect feeding into the prosperous nation that both Rishi Sunak and Sir Keir Starmer have promised.
The views and opinions expressed are not necessarily those of AltFi.