Six years on: Has open banking in the UK peaked?

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Last editedJan 20243 min read

Last year, when marking the fifth anniversary of open banking in the UK, we shared that we were eager to see what developments would be unlocked over the course of 2023. At that time open banking had just entered into a new phase, with the Joint Regulatory Oversight Committee (JROC) reviewing the future vision for open banking in the UK and a future entity to replace Open Banking Limited. It was a time of change and we felt certain that the year ahead was going to bring exciting advancements.

So, were we right? Did open banking evolve over the past 12 months? Did the new phase live up to expectations? Well…

2023 brought new open banking milestones

Six years on and we’re still seeing strong and consistent growth.

The volume of open banking payments in the UK doubled in the first half of 2023 compared to the first six months of 2022
A significant milestone was hit in July when the UK reached 11.4 million payments made in a single month; it was later surpassed when we saw 12 million payments in November
Open Banking Ltd reported that one in nine British consumers are now active open banking users
A study led by Censuswide found that nearly a third (29%) of 16-24-year-olds have now made a payment via open banking on their mobile phone

Whilst not quite mainstream yet, open banking was definitely on a lot of people’s radars in 2023 and was referenced in the Chancellor’s Autumn Statement.

Open banking gained a firm foothold in payment strategies

At the start of last year, we reported that one in five businesses across the world planned to invest in open banking by 2025. We’ve already seen many UK organisations act on this and announce that they’ve added to their offering with open banking payments. This includes Yonder, Plend and JustGiving who, last week, announced that GoCardless is now their exclusive open banking payment provider, replacing American Express. The online donation platform estimates that around 10% of their donations are already via open banking, but see the potential to grow this by utilising our Instant Bank Pay feature for instant one-off gifts and donations.

“We’re constantly looking for ways to make donations go further, and open banking payments play a pivotal role. After working with GoCardless for over a year on recurring donations, we were confident that its Instant Bank Pay feature would be perfect for one-off giving. Instant Bank Pay will not only help us to keep costs low but also provide a best-in-class fundraising experience for our customers and their donors.”

Oliver Shaw-Latimer, Senior Director, Payments and Innovation, at JustGiving

Consumers have taken an interest in open banking’s broader potential

The Bank of England interest rates may have hit a 15-year high in 2023, but interestingly we found open banking could be the lifeline that ‘Generation Rent’ needs. A survey of 2,000 consumers revealed that 72% feel that getting on the property ladder is currently unattainable, with over half (52%) of those aged 18-34 believing that lenders should embrace open banking to make the process fairer. Four in 10 (41%) say that lenders use outdated methods to assess applicants, with self-employed consumers feeling unfairly penalised by the existing process.

Overall, consumers felt it was time for lenders to update their methods, with 42% believing lenders should embrace technologies like open banking to consider more data points – such as everyday spending and rent payments – when assessing their mortgage application.

Has open banking peaked?

Not even close! The past year has been one full of positive milestones and whilst we're heading in the right direction, the road to reaching open banking’s full potential is a long one. To be truly mainstream, payment providers, banks and regulators all need to work together to offer a consistent, high-quality experience across all use cases. We’re invested in being on this journey and JROC, who we mentioned at the start, has done a great job in uniting the financial services sector to tackle these challenges together.

In fact, JROC has already set up 2024 to be a year of yet more progress with a commercial Variable Recurring Payments (VRP) pilot set to launch later this year. At the moment VRPs are only publicly available for people wishing to move money between two accounts that they own. The pilot will look to expand them in specific sectors - financial services, utilities and the public sector - and if successful will represent a huge stepping stone to making open banking payments a true challenger to cards. The high costs associated with card payments are something which merchant representatives like the Federation of Small Business have highlighted as a long-standing pain point for businesses.

We’re focused on playing our part in the various industry and regulatory working groups to make sure we stay on track to make this a reality. Because whilst 2023 was good, we believe we can help to make 2024 even better.