Open banking UK rollout gathers pace - Transactions & Technology -

Government-backed initiative to allow registered third-party providers access to consumers’ financial data has two million users.


Imran Gulamhuseinwala

The rollout of open banking in the UK has gathered pace this year despite the Covid-19 pandemic and now boasts two million monthly active users, according to the Open Banking Implementation Entity (OBIE), the government-backed initiative responsible for its implementation.

Open banking seeks to provide a secure way for third-party providers to access consumers’ financial information and the nine leading banks in the UK have been mandated to take part.

“The number of people using open banking-enabled products has been doubling every six months despite the fact the functionality is not yet in place,” says Imran Gulamhuseinwala, who has led the OBIE since the initiative was launched in 2018.

“What we’re trying to do is enable consumers and small businesses to take control over their data and rebalance the market away from the big banks.”

The application programming interface is due to be finished in the next few months, he says, adding if the current uptake continues “it will be only a matter of time before many consumers and small businesses will consider open banking as a fact of life”.

Customer choice

Evangelists for open banking assert that it has the power to completely transform financial services and the result will be more competition, better services and better consumer choice.

“It’s going to enable consumers to better understand the financial decisions they’re making, access a wider range of products, and thereby save money,” Mr Gulamhuseinwala says.

“Open banking allows consumers to realise the value that exists in their transaction data and share it in a myriad of different uses, ranging from credit underwriting to proving your identity. People can allow authorised third parties initiate payments from their bank account without actually being within their bank account to send those payments.”

Over the next decade Mr Gulamhuseinwala expects consumers to become increasingly comfortable interacting with their data and sharing it with third-party apps. “It will lead to much more competition between banks to try and win current accounts and encourage a lot more innovation in the space,” he says.

“There are uses for open banking that the architects behind it never thought of. For example, vulnerable customers could use open banking to set up alerts if they’re worried about fraud, or enable carers to better look after them if they have mental health issues.

“Charities have been trialling open banking to see if it can help clients solve problems related to finance, and we have even seen an app using open banking data to help people better understand their carbon footprint so they can make more effective environmental decisions.”

Open finance

Over the longer term, Mr Gulamhuseinwala says that one of the most exciting aspects of open banking is it represents a “potential stepping stone” to the advent of open finance.

Open finance extends open banking’s data-sharing principles across an even broader range of sectors and products, opening up a range of possibilities for the financial advice and wealth management industry.

“Open finance holds the promise of allowing millions of people in the country to see all their financial relationships in one place. It will demystify financial services and encourage people to engage better,” Mr Gulamhuseinwala says.

We’re trying to enable consumers to take control over their data and rebalance the market away from the big banks

“Research shows that when consumers engage better with financial services, they make better financial decisions for themselves and choose better products as well and secure better deals.

“There is a lot of consultation going on at the moment in the UK about what open finance will look like but the scope could include pensions, mortgages, savings and insurance. That’s when it really takes off: all the data in one place built around serving the consumer.”

In August, Australia passed landmark open banking legislation – the Consumer Data Right Act – which allows consumers to share data related to credit and debit cards, deposit accounts and transaction accounts. Mortgage and personal loan data will be added from November.

“Australia has had the vision to move beyond open finance into areas such as telecoms, energy, and even groceries,” Mr Gulamhuseinwala says. “They believe the data belongs fundamentally to the consumer and not the institution. If you give individuals access to that information, they can use it in great ways.

“The onus is on us to get this right within banking, and then show how it can be rolled out into other products within financial services and then other sectors within the economy.”

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