Open banking experts say current technology is just ‘tip of the iceberg’
Open banking is at a critical junction and the UK must capitalise on the head-start it already has, according to two of the UK’s experts in the industry.
One of them, House of Lords member and technology advocate, Lord Chris Holmes, has forecast a turning point for open banking over the next year.
Open banking allows for financial data to be shared securely between banks and companies, making payments easier for the customer and the seller.
Holmes, who is also an adviser for Trustly-owned open banking company Ecospend, told Morning Wire: “In the next 12 to 18 months we are likely to see an inflection point for Open Banking payments, or a point in which we see mass consumer and merchant adoption of the technology.”
This is just the tip of the iceberg and it has applications across debt management, utilities, the third sector, retail, financial services and many more.
Lord Chris Holmes
Recent data from Open Banking Limited revealed that the number of users of open banking-powered services in the UK has hit nearly eight million people, as customers expect swifter and more efficient payment methods.
But he said there are many more use cases for open banking that have yet to be discovered and open banking payment technology is likely to develop further in the next six months.
“This is just the tip of the iceberg,” said Holmes, “and it has applications across debt management, utilities, the third sector, retail, financial services and many more.
“Account information services also have the ability to significantly impact consumer’s ability to access credit, mortgages, pensions, among many other financial services solutions.”
Hailed as a game-changer in financial services and tech innovation, open banking is already being used by HMRC and National Savings and Investments (NS&I) in the public sector and by Hargreaves Lansdown in the private sector.
According to a recent report by openbanking.org, small businesses are currently leading the adoption of open banking, with 17 per cent actively using the tech.
The British founder of the finance community Open Banking Excellence (OBE), Helen Child, has also said the UK is at a pivotal “inflection point”.
Speaking to Morning Wire, she said: “We have got this first mover advantage, and it’s now about consolidating and moving it forward as regulators come to the UK to learn from a lot of people in this industry.
“We’re looking to create this centre of excellence so we can continue to create this export gold for the UK.”
It’s now about what we do with our lead because there are other countries around the world that can leapfrog us.
Helen Child, OBE
In April, the FCA published a long-term regulatory framework to secure the “existing achievements” of open banking and “unlock its future potential”.
Child, who founded OBE in 2018, said that although the UK is only six years into building the infrastructure for the new payment model, it risks losing its pioneering lead in open banking if it grows complacent now.
“So we’re at that nascent stage but the UK has had the lead. It’s now about what we do with our lead because there are other countries around the world that can leapfrog us.
“The risk is that for a country that invented open banking, and the country that created the blueprint, is that we lose our lead or we don’t consolidate. We don’t do anything with it. We just keep telling ourselves how great we are. That’s not the way forward,” she added.
Instead, Child suggested the UK needs to focus on becoming a global centre that is setting the standards for risk and driving forward interoperability between countries.
“We should be supporting and going into those countries and working with our international partners to provide additional capacity in their market,” she explained.