The Trustee of the Open Banking Implementation Entity Imran Gulamhuseinwala heralded the news that one million Brits have used Open Banking since its 2018 launch.

“One million is a significant milestone, but by no means is it the end,”

said Gulamhuseinwala, an AltFi Powerlist 50 listmaker.

In fact, one million is actually the low-ball figure. Given these numbers are provided by the CMA9 (the nine largest banks in the UK) they don’t include the likes of Starling Bank and Monzo who were early adopters of the technology.

The network of OpenBanking service providers—including banks, account aggregators, financial advice, accountancy services and credit ratings—now total over 200.

Between these service providers, there are now over 200m monthly calls for financial data.

“OpenBanking is about giving customers access to their data to rebalance the market in their favour. By creating greater competition, we are seeing innovation from new entrants and incumbents, which is leading to greater convenience and crucially greater engagement,”

added Gulamhuseinwala.

The OBIE reported that 2019 was a pivotal year for Open Banking, seeing the total number of customers using these inter-bank connections double, while Gulamhuseinwala predicted 2020 will be even more important.

“We believe 2020 will be the year when adoption of Open Banking financial services really takes off.”

Key Features of OpenBanking in the UK:

1. Secure Data Sharing:

   • Customers can consent to share their bank account information with third-party providers, such as financial apps, payment services, or fintech companies, without giving direct access to their login credentials. This is done through secure APIs, ensuring data protection.

2. Access to Financial Data:

   • OpenBanking allows approved providers to access key financial information such as account balances, transaction history, and payment initiation. This helps to offer tailored financial products, better budgeting tools, and easier comparison services.

3. Payments and Transfers:

   • With OpenBanking, payments can be made directly from a customer’s bank account, bypassing the need for cards or other intermediaries. This makes payments faster, cheaper, and more secure.

4. Increased Competition:

   • OpenBanking fosters greater competition among banks and financial service providers by giving customers more choices. Fintech companies can now offer innovative products and services, such as personalized savings accounts, better loan options, and seamless cross-border payments.

5. Customer Control and Consent:

   • The customer has full control over their data. They can choose to share or revoke access to specific information at any time, providing greater transparency and control over personal finances.

6. Impact on Businesses:

   • For businesses, particularly in sectors like travel, OpenBanking helps reduce transaction fees, improves cash flow with quicker settlements, and reduces fraud risks. Companies can offer smoother, more secure payment experiences that lead to better customer satisfaction.

Benefits of Open Banking in the UK:

• Lower Transaction Fees: By removing intermediaries like card schemes, OpenBanking reduces the costs associated with payments.
• Faster Settlements: Payments through Open Banking are processed in real time, allowing for immediate fund transfers.
• Enhanced Security: Open Banking uses strong customer authentication (SCA) to ensure secure and fraud-resistant transactions.
• Better Financial Management: Consumers benefit from better budgeting tools, personal finance management, and tailored financial products based on their transaction history.

Impact on the UK Travel Industry:

In the UK, Open Banking has been embraced by several sectors, including travel. Many travel businesses, such as airlines, booking platforms, and hotel chains, are using Open Banking payments to streamline transactions. This technology allows for direct payments from a customer’s bank account, reducing reliance on credit cards and lowering processing fees.

Example: In January 2024, UK holidaymakers spent 230% more year-on-year using Open Banking technology, which allowed for more secure and cost-efficient travel payments.

Challenges and Considerations:

• Customer Awareness: While Open Banking has many benefits, many consumers are still unfamiliar with the technology. Widespread education is needed to increase adoption.
• Data Security and Privacy Concerns: Despite high-security measures, concerns about data privacy and unauthorized access may still deter some customers from embracing Open Banking.
• Regulatory Compliance: Open Banking providers must comply with strict regulations, including the UK’s Financial Conduct Authority (FCA) guidelines, to ensure the technology is used securely and transparently.

Overall, Open Banking is transforming the UK’s financial ecosystem, driving innovation, reducing costs, and enhancing customer experiences, particularly in industries like travel.