The UK were proud pioneers of Open Banking. Launched in 2018, the government, regulator and industry-backed initiative was groundbreaking financial technology. Allowing approved 3rd parties to access financial information at the touch of a button it was truly revolutionary.

For consumers, it opened up access to new and existing products, like credit, debt advice or financial advice. For business and financial services, it enhanced competition, provided real-time data for informed decision making and provided a better user experience to engender customer loyalty.

In their Open Banking Impact Report (October 2023), Open Banking org reported that 1 in 9 Brits, or 11%, now use open banking services as open banking payments. There was further growth since the cut-off point for the report (June 2023), with 10.8m payments made in August 2023.

Open banking, while promising, has faced several challenges in gaining traction in the lending space. 

So what’s the problem?

A significant element is a need for more consumer awareness. Many consumers still need to learn about open banking and how it can benefit them in lending. They may be hesitant to adopt open banking solutions without a clear understanding of their advantages.

Legitimately or not, there's also inherent concerns about the security of sharing financial data through open banking platforms. Some may be apprehensive about sharing sensitive information with third-party providers, such as bank account details. Arguably consumers give far more personal data away when they sign up without a second thought to social media platforms. This security concern is less prevalent among the digitally savvy Gen Z consumer group. 

Embedding security

A broader education piece is needed here. Open Banking Limited (formerly the OBIE) was created by the Competition and Markets Authority (CMA) to deliver the security architecture to enable developers to harness technology. This makes it easy and safe for individuals and SMEs to share the financial information held by their banks with third parties.

With bank-level security at its heart, only FCA-regulated businesses can enrol in the open banking directory. Open Banking itself uses rigorously tested software and security systems (the Open Banking API security profile is based on Financial Grade API (FAPI) specifications). As more people adopt open banking and have positive experiences, we expect to see increased uptake and greater awareness of the inherent safety mechanisms built into it to protect their data.

Barriers to adoption

Regulatory frameworks surrounding open banking are still evolving. Compliance with these regulations can be complex and time-consuming for financial institutions and fintech companies, slowing the adoption of open banking solutions.

Financial institutions may struggle to integrate open banking technology into existing lending processes and systems. Legacy systems may not be designed to share real-time financial data securely.

However, despite these challenges, open banking is expected to explode in the UK lending market for several reasons:

Regulatory Support: The UK has been at the forefront of open banking initiatives, with regulations such as the Payment Services Directive 2 (PSD2) mandating banks to open up their APIs (Application Programming Interfaces) to third-party providers. This regulatory support creates an environment conducive to the growth of open banking solutions.

Innovation and Competition: Open banking encourages innovation and competition in the lending market by enabling fintech companies to develop new products and services tailored to consumer needs. This increased competition can drive down costs and improve the overall customer experience.

Consumer Demand: As consumers become more digitally savvy and accustomed to seamless digital experiences, there is increasing demand for convenient and personalised lending solutions. Open banking enables lenders to access a more comprehensive view of a borrower's financial profile, leading to more accurate risk assessment and personalised loan offerings.

Partnership and Collaboration: Financial institutions and fintech companies are increasingly forming partnerships and collaborations to leverage open banking technology. By combining the expertise and resources of different stakeholders, these partnerships can accelerate the adoption of open banking solutions.

There's been interesting research on consumers' willingness to share data if they perceive a better reward as an outcome. So, suppose open banking access allows consumers to drive away a new car or take the keys to their first home. In that case, they are far more likely to accept sharing than for something where the reward is less tangible, like insurance premiums. The research found that customers will accept loss of privacy if it rewards them in ways they would not otherwise secure (Fernandes & Costa, 2023). 

A win-win for both consumers and lenders

Open banking has numerous benefits for lenders and customers. At it's core, it drives efficiency, fosters innovation, and empowers consumers in the financial ecosystem. It also delivers:

Increased Access to Financial Products: Open banking allows lenders to access a consumer's financial data with their consent from various institutions. This comprehensive view of their financial profile enables lenders to make more informed lending decisions. Individuals who may have been excluded from traditional lending due to limited credit history or lack of collateral can now access financial products tailored to their needs.

Streamlined Loan Application Process: With open banking, consumers can authorise lenders to securely access their financial data, eliminating the need for manual documentation and paperwork. This streamlined process reduces the time and effort required to apply for loans, making it more convenient for consumers.

Personalised Lending Solutions: By analysing a consumer's transaction history and financial behaviour, lenders can offer personalised lending solutions that are better suited to their individual circumstances. This may include customised loan terms, interest rates, and repayment schedules tailored to the borrower's financial situation and risk profile.

Competitive Interest Rates and Terms: The increased competition in the lending industry facilitated by open banking can lead to more competitive interest rates and loan terms. Lenders can leverage the insights gained from accessing a consumer's financial data to offer more competitive pricing while still effectively managing risk.

Improved Transparency and Control: Open banking promotes transparency by giving consumers greater visibility and control over their financial data. Individuals can monitor which third-party providers can access their information and revoke access anytime. This transparency enhances consumer trust and confidence in the lending process.

Faster Loan Approval and Disbursement: With real-time access to financial data, lenders can expedite the loan approval and disbursement process. This reduces the time it takes for consumers to receive funds, making it particularly beneficial for individuals needing quick access to credit for emergencies or time-sensitive opportunities.

Enhanced Financial Management Tools: Open banking enables the development of innovative financial management tools and apps that help consumers better understand their financial health and make informed decisions. These tools can provide insights into spending patterns, budgeting recommendations, and alerts for potential financial issues, empowering individuals to manage their finances more effectively.

The road to mass adoption

Although a British invention, open banking isn't unique to the UK; it is part of a broader global trend towards financial data sharing and interoperability. Countries like Australia, Canada, and Singapore also implement open banking frameworks, indicating a global shift towards more open and connected financial ecosystems, benefiting consumers, businesses, and the broader economy. This trend signifies a shared commitment to harnessing technology to drive positive change in the financial landscape, making financial services more accessible, efficient, and tailored to individual needs. A win for everyone!

While open banking may have faced initial hurdles in lending, its growing usage shows it has the potential to revolutionise how financial services are delivered. As regulations evolve and consumers and lenders move along the adoption curve, it's only a matter of time before it achieves mass adoption and becomes the norm. 


Open Banking Impact Report 2023

Eurasian Business Review (

Fernandes & Costa, 2023).