According to a new report by the independent group Coalition for a Digital Economy (Coadec), the UK open banking industry has reached a crossroads and suppliers require more certainty about its future path.
Nearly 5,000 people are working in the UK open banking and the industry raised over £880 million last year, so a lack of direction could impact the continued progress of open banking. Coadec’s report believes there is an opportunity for the industry to accelerate to the next level, but could be impacted in other countries in Europe if the wrong decisions are made by regulators.
In 2018, UK banks were required to introduce the Competition and Markets Authority (CMA) open banking regulations, which resulted in the launch of the application programming interfaces (APIs) in finance, providing customers with more control of their accounts.
The end goal was to enhance competition in an industry traditionally controlled by large financial services businesses. Customer banking data is shared by the industry via APIs, with permission from the customer, allowing companies to deliver customised solutions.
Over seven million people in the UK used open banking in 2022 and according to data reported to Open Banking Limited building societies, two million users were added in the last year. While open banking has continued to progress and develop a new sector of financial-based technology, the next stage of open finance can go much further.
Open finance will see companies share data across far more services, like mortgages and loans, and offer new products and solutions from other organisations.
The Coadec report explains that a multibillion industry is emerging beyond payment account data to create a new era of innovation and competition. Luke Kosky, fintech policy lead at Coadec explains that the growth of open banking has been a success for the UK. The industry has grown to over £4 billion in five years, and with the right support and regulation, the opportunities for open banking are limitless. However, Kosky emphasises that we have reached a defining moment for open banking and the next steps will define future success.
There is some uncertainty in the sector as companies await a report from the Joint Regulatory Oversight Committee (JROC) which replaced the Open Banking Implementation Entity (OBIE). One request of Coadec is retaining the OBIE past April, believing the OBIE must continue in its current form for the short term to protect the integrity of the open banking industry.