Olga Karablina, Head of Payment Product Development and Partner Relations at ECOMMPAY
The growth of Open Banking has largely been seen by the industry as slow and somewhat stagnant since its introduction in 2018. In fact, research from ECOMMPAY showed that only 14% of UK consumers completely understood it. However, recent news surrounding new Open Banking adoption and usage stats may prove that we are likely to see consolidation of Open Banking technology this year.
The numbers of people engaging with Open Banking is not as big as the figures for payment services like Buy Now, Pay Later, where in 2022, approximately 27% of consumers (17 millions) were using the service in the UK alone, but it doesn’t mean it will never reach such numbers.
User numbers are picking up
2023 has already seen major activity in the Open Banking space. The appointment of the new Chair and Trustee of the Open Banking Implementation Entity (OBIE), Marion King, shows that it is a real focus for the UK and the government is committed to making use of the benefits that Open Banking offers.
Moreover, current figures show that the number of consumers and SMEs actively using Open Banking-powered services in the UK has reached 7 million. This milestone comes on the 5th anniversary of the Second Payment Services Directive (PSD2) which made Open Banking a regulatory requirement in the UK. The new figure is quite a significant increase from the 4.5 million users we saw during this time last year.
Open Banking at its core must be understood before it can be used widely. Since its inception, it has taken a more slow and steady approach to show its worth. However, with the upcoming March budget, current economic climate and the ongoing debate around BNPL still being a distraction, there isn’t a clear cut path for Open Banking to take center stage.
How this ties in to tech developments this year
The upcoming March budget will no doubt have something to say about the tech sector growth. In February, the government closed the Help To Grow: Digital Scheme which was created to give 100,000 SMEs free and impartial advice on how technology can help their business, including vouchers worth up to £5,000 to cover 50% of the costs of buying pre-approved software. Unfortunately, this initiative was used by less than 1000 SMEs which led to it being discontinued. Despite this, we may see the March budget bring about new ways in which the government is investing in the UK’s tech outlook – providing a potentially new opportunity for Open Banking to increase its adoption.
Additionally, the OBIE recently completed their roadmap, in which the six largest banking providers in the UK implemented standards required by the CMA to deliver Open Banking – signaling the start of a new phase for the technology.
Other factors to consider include the rising cases of payment fraud during a tough economic climate which may help push the need for Open Banking, driving further use of the technology within the UK. However, providers of Open Banking technology must ensure that they meet regulations and security standards but thankfully, this is largely happening already. The majority of Open Banking payments are made via mobile devices, and features like FaceID and fingerID on smart devices not only comply with Strong Customer Authentication (SCA), but also provide an added layer of security.
All these developments could provide the fuel needed to increase the use of Open Banking in the UK this year. Nevertheless, as has been the case with Open Banking throughout the last few years, adoption will continue to steadily rise as we see more use cases for the technology along with better understanding of the benefits of Open Banking.