Henk Van Hulle, CEO, Open Banking Limited
Discussions around financial resilience often revolve around how much people have saved to protect themselves from the inevitable rainy days. Far less emphasis is put on how they are making those savings work for them.
Perhaps this should come as no surprise, for the FCA found that one in four people in the UK have low financial resilience. One in 10 people have no cash savings at all, and 21% have £1,000 or less to draw on in an emergency.
Those figures point to a challenge that cannot be addressed simply by telling people to save more. Building financial resilience looks different depending on someone’s circumstances. For someone struggling with debt alongside rent, bills and other everyday costs, the immediate priority may be reducing the amount they lose to borrowing costs. Doing so can create valuable breathing room in a household budget – helping people begin to build a financial buffer, feel more in control of their finances and have greater flexibility when unexpected costs arise.
For someone who has already managed to build that buffer, the challenge is different: ensuring the money they have worked hard to put aside is working as effectively as it can. Financial services need to be capable of responding to both.
This is where better use of financial data can make a tangible difference. With a consumer’s permission, Open Banking can provide a more up-to-date and dynamic picture of income, expenditure and cash flow. The value is giving consumers a clearer view of their finances and using that insight to help them take appropriate steps that can reduce their challenges and increase their opportunities.
Debt is an obvious place to start. The FCA found that 39% of adults in the UK have unsecured debts, with a median amount of £2.5k. It also found that, of the 1.7 million people who had used a debt advice or debt management service in 2024, 61% said their debts were more manageable as a result1. Better use of real-time financial data can, with the user’s permission, support improved credit risk and affordability assessments, while also creating opportunities for more effective debt consolidation, where this is appropriate for the consumer. All of these steps can go towards feeling more in control of existing borrowing which can be an important first step towards building financial resilience.
There is significant value to be unlocked here. Analysis conducted by EY for Open Banking Limited estimates that debt consolidation alone represents a potential £17.1 billion in annual benefit at greater adoption, alongside £280 million annually from improved credit risk and affordability assessment. More effective uses of financial data not only help consumers reduce the cost of borrowing but also enable them to access products that better reflect their circumstances and financial priorities.
Reducing the cost of borrowing, however, is only one part of the financial resilience challenge. Once someone has been able to put money aside, the question becomes whether that hard-won financial buffer is working as hard as possible for them. The FCA found that 61% of people with more than £10,000 in investable assets held at least three-quarters of these assets in cash, rather than investments.
Depending on a consumer’s appetite for risk, this represents a potential loss of opportunity to maximise investment growth.
The same principle applies to the money people can put aside. EY estimates a potential £1.8 billion opportunity from account switching, £1.5 billion from automated ISA wrappers and £5.9 billion from automated investing. Better use of financial data can help remove some of the friction that leaves savings sitting in products that fail to maximise returns and making it easier for people to understand their options and decide what is right for them as their lives change.
Open Banking cannot create disposable income where there is none, nor can technology remove the financial pressures facing many households. What it can do is help the financial services industry respond more effectively to an individual’s circumstances. For some consumers, that could mean finding a more manageable way to deal with existing borrowing; for others, it could mean getting more from money they have worked hard to put aside. Financial resilience and risk appetite are personal, Open Banking provides the foundations for financial services to reflect that, enabling services to be tailored to an individual’s circumstances, needs and choices.
As Open Banking evolves and the UK moves towards Open Finance, turning financial insight into action should become increasingly important. The next phase should move from giving people more information about their money, to making it easier to use that information to make informed financial decisions. When every pound matters, helping consumers make better use of the money they already have is a practical place to start.