OPEN BANKING IN THE UK – BRINGING ABOUT A TRANSFORMATION IN BANKING

Open Banking in the UK - Bringing about a Transformation in Banking

Namratha Prasad

Introduced in January 2018, Open Banking was a UK government-backed initiative that required nine of the biggest UK banks to share their current account holder data – with the customers’ permission – through an integration technology with third parties (including challenger banks, fintech firms and credit reference agencies). The system was set up and operated by Open Banking Limited, a non-profit created especially for the task.

The shared data included location of branches, exact details of certain banking products and transactional data of customers. The data was expected to be used by the third parties primarily to create new products. On the other hand, the Open Banking system enabled customers to view all of their current accounts, savings and credit cards in one place – either the website or mobile app – regardless of who they banked with.

The Open Banking system was expected to open up the UK financial services industry, by driving competition and innovation. It was believed to have the potential to upend how banking was done and disrupt the sector. The system was expected to provide customers with products better suited to their individual needs. It was believed that customers would easily be able to compare competing products from varied providers, thereby leading to more choice and better financial management through new products.

According to PricewaterhouseCoopers, 33 million people were expected to have signed up to Open Banking driven services by 2022, but the actual numbers were low. The low customer adoption was stated to be not only due to low customer product awareness, but also due to concerns about security and privacy of personal data. However, banking analysts believed that once consumers realized that the system was not a gimmick and would help them save money or time; it would take off in a big way.

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