Open banking's potential to spur £18 billion of benefits to consumers and small businesses has been highlighted in a new report.
The report, led by independent representatives on the steering group of the UK's Open Banking Implementation Entity (OBIE), identified the success that businesses in the market are making in providing open banking-enabled services in areas such as personal finance management and credit risk profiling, and the scope for further growth in other service lines.
To deliver on the full potential of the UK's open banking framework, however, industry needs help from the government and regulators, the report said.
"Open banking is at an early stage of development but early indications suggest for the full potential value of open banking to be realised for consumers, it must continue to develop, evolve and grow into open finance and become part of ‘open life’," the report said. "This requires a strategy bringing consistency and security to data portability and appropriate governance arrangements to ensure open finance is delivered and in a way which puts consumers’ interests first."
"Without a government or regulatory mandate of this kind, the value of open banking and open finance is unlikely to materialise. Instead, it could have unintended and harmful consequences, limit competition further or exacerbate financial exclusion," it said.
"The FCA’s commitment to look at open finance, the promise of the Digital Markets Unit, the Treasury's review of the payments landscape and BEIS’ smart data review provide vehicles through which open finance could be set on the right path to securing better financial health for all consumers in the UK. For open banking to be a success, co-ordinated action must be taken, and soon," it said.
Financial services and technology law expert Luke Scanlon of Pinsent Masons, the law firm behind Out-Law, said that the new report comes at a critical time and highlights the significant work that is to be done for customers of financial services to realise the benefits of open finance.
"As the report highlights, there is now a clear agenda that is being considered by government and all of the key regulators in the UK to look beyond open banking to other datasets and other means of delivering products and services to customers which address their current urgent financial needs," Scanlon said.
"The significant issues around implementation of the PSD2 ‘open banking’ interfaces should be viewed in this light. This is not a one-off challenge for banks and others required to implement the technology. They must look to the long term to understand how they can make the most of the opportunities that opening up more data, providing API access and collaborating with other holders of financial data will present," he said.
According to the new report, open banking can enable new tools to help consumers and businesses compare current account options, obtain third-party alternatives to traditional overdrafts, better manage their cash-flow and balance transfers on credit cards, help people get better deals on household bills, and enable savings for those making international payments.
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