The size of the banking industry in the UK is estimated at £92.3 billion in 2022, while this value is set to increase in the near, medium and longer-t
The size of the banking industry in the UK is estimated at £92.3 billion in 2022, while this value is set to increase in the near, medium and longer-term.
This growth is partially being driven by innovation and digitisation, with open banking a key element of this evolution.
But what exactly is open banking, and what does the short-term future hold for this technology? Let’s get into it!
What is Open Banking?
The term ‘open banking’ has emerged from the fintech revolution, while it refers to the use of open Application Programming Interfaces (APIs) that enable third-party developers to build applications and services within the financial services sector.
This has been widely adopted in the banking realm, with open banking now in its fifth year of innovation in the UK.
During the previous four years, we’ve seen significant change and innovation, while the transition to open banking has been accelerated considerably by the pandemic and its associated lockdowns.
Currently, it’s thought that approximately four million UK customers and companies are now actively using open banking, while a huge number of service providers now offer relevant products and services.
What Does the Future Hold for Open Banking?
For open banking to work, it’s crucial that consumer data is managed securely and effectively at all times.
What’s more, customers and businesses must be given the choice of whether or not they want their data shared with third parties. After all, while some may benefit from having their details shared with targeted lenders or debt management firms, others may want their privacy respected or have clear guidelines in terms of how their data should be used.
Regardless, adoption rates continue to soar nationwide, in line with rising demand and the desire to access more transparent and intuitive current or savings accounts.
To succeed as an open banking platform is challenging in this climate, so operators must continually adapt to rising and shifting demand while striving to maintain and develop their technology.
This is particularly true given the cost-of-living crisis in the UK, as customers will continue to search for banking solutions that optimise the value of their savings, make money management easier and afford them access to products that enable them to make the most of their capital.
In the near-term, we should also expect open banking expand to offer access to a much broader range of financial products and services.
So, while open banking software already allows customers to grant regulated third parties access to their data, a broader notion of ‘open finance’ could extend this to include more diverse datasets.
This will be an interesting space to watch in the future, but there’s absolutely no doubt that open banking will continue to evolve in the near-term as it continues to be adopted by a wider range of institutions and customers.