Opinion Digital Banking

Leader or loser? The future of UK Open Banking hangs in the balance

It’s time for the creation of a global Open Banking centre of excellence, and the UK should lead the way, writes Helen Child, CEO and founder of Open Banking Excellence (OBE)

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The stakes could not be higher. In the next 12 months, we will start to see whether the UK will remain a global leader in a rapidly growing industry or watch in dismay as other nations race ahead.

Six years ago, Open Banking went live in the UK. Today, there is no doubt that Britain is a global leader in this exciting space, which enables consumers to share their data securely to access innovative and inclusive new types of financial services.

Open Banking has already created around 4,800 jobs in the UK and the sector is now worth more than £4bn. Globally, it is expected to generate more than $416bn in new revenues.

If government and industry make the right moves now, the already impressive growth of Open Banking will become exponential. We will be able to leverage the UK’s global leadership position to position ourselves at the forefront of the next generation of financial services. If not, we will have wasted a significant opportunity. We need to move quickly and decisively — or count the cost of losing our lead.

What’s next for Open Banking?

To understand the importance of the UK’s first-mover advantage and global leadership position, we must look to the future. Open Banking is the beginning of a much longer story. The next stage of the journey is Open Finance, in which data from a wider range of financial services is exposed to APIs and made available to be shared securely.

Ultimately, we will see the dawn of an Open Data economy. A wide range of industries from utilities to healthcare will introduce Open Banking-style, giving consumers and businesses access to a wide range of new products and services which bring genuine benefits to their lives.

The UK has a chance to lead this growing industry. There is a clear opportunity to shake off our post-Brexit torpor and become a global hub of knowledge, learning and innovation that sits right at the heart of an important emerging global market.

There is also a risk of squandering our advantage. Australia has already moved from Open Banking into Open Energy, with the Consumer Data Right enabling consumers to share their energy data with accredited third parties to get better deals or switch providers more easily. Brazil moved from Open Banking to Open Finance in just two years and has now rolled out Open Insurance. Competitors are moving fast and we must also move quickly to stay ahead. 

How can the UK protect and maintain Its global leadership position in Open Banking?

The Open Banking Excellence (OBE) Global Open Finance Index shows that the UK is the most advanced Open Banking market in the world. The forward-thinking rules, regulations and standards which enable the sharing of bank account data on a consent-driven basis here in Britain also provided a blueprint for other jurisdictions. We have the talent and access to funding in place to sustain our forward momentum.

There is political and regulatory commitment, with the Joint Regulatory Committee (JROC) working behind the scenes to introduce disruptive new innovations such as non-sweeping Variable Recurring Payments (VRP), which let consumer and businesses initiate regular payments of varying amounts from their bank accounts. 

We’re also awaiting game-changing new legislation. In 2024, the Data Protection and Digital Information (No.2) Bill will be finalised and fire the starting gun for Open Finance by mandating Open Banking-style data-sharing in a range of sectors including energy, telecoms, pensions, mortgages, and insurance. 

These developments are hugely positive, yet do not fully address the challenge ahead. Nor will they fully unlock the many opportunities on the horizon. To continue leading the world, we must go further and faster. 

Creating a Pathfinder for the UK

The way forward for the UK is the creation of a global Open Banking export hub and centre of excellence that is specifically designed to help emerging markets establish their own ecosystems. This Agile Pathfinder could leverage UK expertise, identify opportunities and support the UK Government’s trade mission strategy and programme. The Pathfinder should adopt a strategic approach to drive collaboration between industry and government to support policy objectives on financial services sector growth, generate new trade and employment opportunities and underpin trade mission strategy and programmes.

In the short term, there is a significant export-led growth opportunity for players in the UK Open Banking ecosystem. We have been monitoring 30 markets around the world and estimate that the potential market for UK firms will be worth £1.76bn over the next five years. British Open Banking pioneers can perform a wide range of roles in emerging ecosystems, such as writing the technical standards which govern the exchange of data between participants in the ecosystem.

Firms in the UK can also offer API development services, deliver regulatory sandboxes which are testing environments for Open Banking services or build directories which record which firms are regulator-approved to engage in data sharing. Longer-term opportunities include the creation of global standards which enable data to flow across borders and address the challenge of interoperability between ecosystems.

With Open Banking now almost six years old in the UK, tech firms have had time to build the tech, processes and skills to work at scale processing transaction data, managing customer data safely and integrating with incumbent financial institutions. No other country can match the credentials of UK firms in this area.

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