Two years since its inception, Open Banking has begun to transform the banking world.
While understanding may still be low among those outside of the financial sector, do not underestimate this phenomenon.
In fact, low awareness is to be expected — Open Banking is a technology that exists behind the scenes, and customers will only engage with it indirectly. If they don’t notice it, that shows that it’s working.
Open Banking allows people to safely and securely connect their bank accounts with regulated third parties, offering a host of new benefits — from automatic savings and discounts, to helping users build up their credit rating.
And while customers might not be aware of the term, they are certainly using the technology. New figures we have published this week show that Open Banking has surpassed one million customers — and numbers are growing, more than doubling in under six months.
We are still at the very early stages, but already third-party apps are helping both consumers and small businesses manage their money better, benefit from more affordable credit, and find the best loans on offer.
Some are even being used to help vulnerable customers cope with financial stress, offering budgeting tools and alternatives to high-interest pay-day loans.
In time, Open Banking will give us all the tools to make better financial decisions.
So far, the majority of the effort in getting Open Banking off the ground has been on designing and implementing the underlying technology standards.
It has required unprecedented collaboration among mainstream banks, fintechs, regulators, and consumer representatives.
There are now over 200 authorised third parties in various stages of enrolment into the ecosystem. This is a huge show of confidence that Open Banking will continue to grow and deliver on its potential to rebalance the market in favour of consumers.
And now that the foundations of this finance revolution have been built, the real progress can begin.
Today, Open Banking relates only to payment accounts such as current accounts and credit cards. But its central principle — that the data a bank holds on a customer belongs to that customer and not to the bank — could be applied to other products.
In the future, products such as savings, mortgages, insurance and pensions could have their Open Banking moment under the broader banner of “Open Finance”.
Imagine if customers could see all their financial relationships in one place and use that information to make better decisions — automatically seeing what mortgage they could afford, switching to the best value savings account or insurance product, and gaining a holistic perspective on their retirement planning.
This technology could bring the power of bespoke financial advice (usually reserved for the very wealthy) to all banking customers.
The UK is recognised the world over as a pioneer in Open Banking. We should be immensely proud of what we have achieved so far.
Main image credit: Getty