Open Banking: Could User Numbers Double Again in the Next 6 Months?

By Lubaina Manji, Senior Programme Manager, Open Up 2020 Challenge, Nesta Challenges

As the pandemic continues to promote socially distanced and increasingly digitised behaviours, it is no wonder that open banking is growing in popularity. Not only are people increasingly turning to online ways to shop, but they are also seeking intuitive, digital ways to manage their money and try to mitigate the financial impact of lockdown. As the pandemic continues to impact people’s finances, the question remains whether these behaviours will continue in the long term.

Open banking was introduced in the UK in 2018 to revolutionise the way people manage their money and encourage competition between financial services providers. Almost three years on it seems well on its way to achieving this goal.

Despite initial concerns among users about sharing financial data with third party providers, things are gradually beginning to change, and the past six months have seen a dramatic shift. More than two million people are now using open banking-enabled products in the UK – double the figure from January, according to recent OBIE data. But where has that growth come from and is it sustainable?

Our research for the Open Up 2020 Challenge found that people who have already used open banking-enabled apps are overwhelmingly positive about their experience. They are impressed with how easy the apps are to use (84%) and 82% say open banking has improved how they manage their money. Others report that they’ve been able to save money (73%) and say it’s made them more likely to use open banking products again in the future (82%). When people can see a clear benefit to sharing their data and understand the value, they are more likely to do so.

Aside from the impact of lockdown in encouraging digital habits, part of the reason that open banking has begun to take off is the various programmes launched to support it. Over the past couple of years, several initiatives have arisen to support the adoption of open banking. These include the Open Up Challenge 2018, mandated by the Competition and Markets Authority to encourage open banking innovation for small businesses and Nationwide’s Open Banking for Good (OB4G) initiative to encourage solutions to improve financial capability. Most recently, Nesta Challenges ran the Open Up 2020 Challenge in partnership with the Open Banking Implementation Entity to support innovations that help people make more of their money.

Open Up 2020 has just come to a close with four winners crowned: Mojo Mortgages, Moneybox, Plum and Wagestream. All of these companies are already making a big difference to the financial lives of their users and, collectively, they have tripled their open banking users throughout the course of the Challenge.

But what was equally exciting was the wider applications of open banking that we saw throughout the Challenge. From Kalgera, using neuroscience and AI to predict financial vulnerability among those living with dementia and help prevent fraud, to Currensea – a travel debit card that helps users save up to 80% on bank charges when spending abroad, solutions emerged for a breadth of financial issues. With such wide-ranging, innovative use cases developing, the future of open banking looks extremely promising, and it won’t stop there.

As attitudes toward data sharing evolve, so will the money management landscape. Competition will grow, as financial institutions and fintechs increasingly innovate to offer new propositions and customer offerings enabled by open banking, attracting more customers, and supplementing existing capabilities. It will also serve as a stepping stone towards the advent of open finance, wherein the principles of data sharing can be extended to other financial services, such as savings, investments, pensions and insurance – as opposed to just current accounts.

By unlocking access to new datasets – many of which are not digital at present – financial services will evolve to be more personalised, holistic, and accessible. With the help of open finance-enabled technology, people will be able to find products that better suit their needs, including – at minimum – more accurate creditworthiness assessment for credit cards, loans or mortgages; bespoke, equitable personal finance management as well as automated switching and renewals for insurance and utilities. The potential to innovate and better the financial lives of consumers is boundless.

When we interviewed people for this survey between July and August, over half (55%) of people were trying to prepare their finances for another lockdown. With tighter national restrictions in place, never has there been a more critical time to encourage disruptive financial innovation. Now is the time for banks and fintechs to explore ways of working together to realise open banking objectives and deliver new services to an ever-widening pool of customers. If financial institutions and fintechs capitalise on this opportunity to accelerate remote and digital access to financial products, with a focus on improving the customer journey, doubling open banking user numbers in a matter of months again could well be within reach.