Three years of Open Banking: Covid accelerates digital shift but where do we go from here?
More than that though, it was a clear attempt to put the customer first and stimulate competition through the use of technology. Secure data sharing would empower consumers to compare banking products and switch more easily between them, with banks competing to provide customers with better services, more choice and lower prices.
So, how far have we come over the past three years, and where do we go from here?
How Covid-19 turned the tide
The requirement for all UK-regulated banks to allow customers to share their financial data with approved third-party providers has fostered greater collaboration across the financial sector.
Already we have seen valuable partnerships forged between large banks and fintech start-ups, with greater emphasis now being placed on innovation. Naturally, the benefits of such partnerships filter down to the consumer in the form of better products and services, not to mention a more interconnected and open financial ecosystem.
Most importantly, however, it has given banking customers greater control over their finances. Using new apps and digital platforms, they can now obtain a clear view of their finances to budget more effectively, find better deals and generally make more informed decisions.
Yet, positive though the premise is and early developments have been, Open Banking is still in its infancy; a lack of awareness about its practical benefits could be preventing more wide-scale use. Indeed, only 18% of consumers are currently aware of what Open Banking means for them, according to research by PricewaterhouseCoopers.
Whether they realise it or not, though, many consumers have been relying on Open Banking more heavily in recent months. The onset of the Covid-19 pandemic early in 2020 has accelerated the shift towards digital banking, with more people now regularly utilising mobile payment apps and technologies that help them manage their finances.
Official figures published in September last year suggest there were more than two million users of Open Banking-enabled products – a figure which doubled in the first half of 2020.
Open Banking’s benefits have taken on a new significance in the face of mass disruption, too; it helps financial services providers obtain an accurate and up-to-date view of an individual’s financial situation and behaviour, while enabling the consumer to make more informed decisions when it comes to finding products best suited to their needs.
An outlook for the future
The finance sector has made positive strides in a short space of time with Open Banking. The foundations are firmly in place, and now is the time for solutions that use Open Banking to go beyond simple use cases.
In the near future, the apps that will be built on top of Open Banking will become increasingly more sophisticated. The ever-growing ability to let information flow between applications will enable new products or iterations of existing offerings to be built, integrated and modified much quicker than before.
The impact of data sharing will also soon extend even further into all financial markets and solve pain points within each of these spaces. It will unlock a host of new financial products – particularly within complex markets like mortgages, pensions and insurance – and streamline the process of accessing these products.
For consumers, the benefits will be immense. Progress is already underway to connect fragmented sectors of the market and offer a seamless customer experience. Examples of sophisticated innovations that we are already seeing include services that provide personalised advice on how banking customers can improve their credit score, and applications that allow employees to save directly from their salary and track their wages.
On reflection, the Open Banking initiative has already been a success in many ways. Most importantly, it has granted consumers more control over their financial lives, and the power to choose banking products and services that work best for them.
Over the coming months and years, I look forward to seeing how this initiative will extend into more financial products, offering a fuller picture of a person’s financial status, and creating a host of truly sophisticated financial services.
Ammar Akhtar is the co-founder and CEO of Yobota, a London-based technology company.