UK Open Banking adoption more than doubled last year, propelled by the pandemic and customers’ greater reliance on – and preference for – digital online services and mobile apps.
According to the Open Banking organisation (the Open Banking Implementation Entity, controlled by the Competition and Markets Authority and nine major UK banks), more than 2.5 million people were using these services by January 2021, up from a reported one million before the pandemic began.
Up until that point, adoption had been both tentative and sluggish since launch.
Lockdown didn’t just force people to bank online or from their phones, but also persuaded them to look for ways to better manage their finances, helped by new FinTech services and by being more in control of their own data.
Open Banking allows them to authorise a secure exchange of account data with a trusted third party, via new application programming interfaces (APIs) and data aggregation techniques that had not been open to the sector before in quite this way.
However, Open Banking is again at an inflection point, according to a new research brief from technology and finance analyst firm, CB Insights.
Usage, partnerships, and funding are again on an upward trajectory, which creates both an opportunity and a challenge to traditional banks, and to any financial services companies that have been slow to respond.
As a result, banks will “need to be proactive in addressing and catering to their customers”, says the report. In addition, they will increasingly need to focus on a new class of tech-savvy “developer users”, alongside their traditional customer base.
Open Banking isn’t just about FinTech innovators, or the customer and their data, therefore. It is also about the traditional finance sector being open to new ideas and being in the vanguard of that process, rather than behind the curve.
The good news is that the industry is now seeing “record levels of investment and buy-in from major financial institutions”, says the report, along with “sky-high valuations” for players such as Plaid, MX, and Tink.