The UK today has 6.5 million active users of technology powered by open banking.
In a recent statement announcing the news, the country’s Open Banking Implementation Entity (OBIE) added that there were 7.5 million open banking-driven payments in the UK as of December 2022.
This milestone comes five years after open banking became a regulatory requirement in the country under the European Union’s Second Payment Services Directive (PSD2).
That legislation, put in place when the UK 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 requests and account information can be made.
These requests, known in the industry as API calls, enable the flow of data between banks and the FinTechs on which today’s open banking ecosystem has been built.
In general, open banking payments have experienced 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 bank payments per day.
And with usage increasing, the UK’s Competition and Markets Authority (CMA) announced this month that the country’s six largest banks, part of the UK’s Nine Largest Current Account Providers or CMA9, have completed open banking requirements as set out. by the CMA 2017 roadmap.
As for the three laggards, Allied Irish Bank, Bank of Ireland and Danske, the CMA said it “will consider applying appropriate measures to ensure [they complete the roadmap] timely.”
The future of open banking in the UK
With the OBIE’s job essentially done, the UK banking sector is looking towards the next stage of open finance, in which a new authority will succeed the implementing 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 OBIE’s funding and organizational model, which was created by the nine banks initially ordered by the CMA to make changes, is unlikely to suffice.
And while it demonstrated an intent to build on the gains of the last five years, the absence of any real direction in the JROC statement caused many FinTechs to demand more concrete details about its plan for the future of open banking in the UK.
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 its lack of direction and clarity.
The letter, published in part in Britain’s City AM newspaper, said the December statement “did little to allay our concerns that the integrity and potential of open banking is at risk” and called for the JROC to publish “instructions and timelines for the continuation of the application of Open Banking in 2023 and beyond as a matter of urgency”.
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