Open Banking

Open banking connects banks, third-parties and technical providers – enabling them to simply and securely exchange data to their customers' benefit.

Open Banking is a data portability initiative designed to increase innovation in the UK’s banking market, by allowing individual and SME customers to securely share their data with third parties, allowing a broad range of businesses to compete in the provision of better financial services. The scheme covers current accounts and credit accounts as well as some savings accounts.

Following the CMA’s Retail Banking Order #20175, which mandated participation of the nine largest UK payment services providers, the Open Banking scheme has continued to gain momentum and benefit more users. Between September 2020 and June 2021, the number of users increased from 2 million to over 3 million. And to give an idea of potential impact, research in 2019 found that an additional 12,000 users could save a total of £1.3-£2.2 million per year in unbundled overdrafts alone.

The banking data spectrum shows the potential range of openness in this sector, from closed data about sales reports, through different types of shared data including personal transaction history, to openly published data about banking products.

Open Banking regulation in the UK, which encompasses the Second Payment Services Directive (PSD2), requires banks to publish standardised open data about their products, branches and ATMs, to facilitate permissioned access to customer account data, and to provide wider access to payment services between banking providers. The regulations are at the heart of Open Banking, and are designed to help third party providers to create new services for customers. Examples include account switching, account aggregation, budgeting support, debt advice, credit access, and housing affordability checks. Additionally, the regulations also incentivise existing providers, like Barclays, to develop new and innovative products.

As an example, like the other main UK banks, Barclays was required to implement the standard set of APIs described by the Open Banking legislation. The Open Banking Implementation Entity, which is responsible for oversight of the regulations, works with banks to design technical standards and support their adoption and implementation. Barclays saw strong potential in implementing the standard, allowing it to build on its existing accelerator and open innovation programmes, explore new products and build confidence with customers.

Through the Open Banking ecosystem, Barclays is able to provide additional services, work with innovative startups, and gain better knowledge of their customers. Explore the map here or make your own with our Data Ecosystem Mapping Tool

Many aspects of Open Banking are undergoing continual evolution. The CMA consulted in March 2021 on the future governance of Open Banking and published a response in March 2022. Its consultation invited comments on the future oversight of Open Banking, including the roles of the FCA and the PSR. In terms of regulation, the existing rules of PSD2 are now recognised as a hindrance to further development, and ongoing work seeks to improve this crucial aspect. Another early insight was the need to provide a good user experience to ensure interest and uptake, and such details remain critical and are also under constant improvement.

The UK is a global leader in Open Banking, and must keep all aspects in focus to retain and strengthen this position. This will not only help the scheme itself, but also the many associated jobs and services, as well as other ecosystems as the wider network becomes ever more integrated for mutual benefit. The adoption of Open Banking, as well as lessons learnt from its development, within other emerging Smart Data schemes such as Open Finance will help them to flourish in their own right, in turn supporting the full network of services including Open Banking.