Commercialising Open Banking - digital identity, a key opportunity for banks?

This month marks the third anniversary of Open Banking in the UK – or more specifically, three years since Open Banking became a compliance obligation for banks. Back in 2018, users of Open Banking products and services were counted in the tens of thousands and it wasn’t until the beginning of 2020 that this number slowly reached the million-user milestone.  

However, in the past twelve months we have seen a dramatic growth in both users and transaction volumes, with new use cases prompted by the pandemic, contributing to a 100% growth in Open Banking take-up in just over six months. Today, over 2.5 million UK citizens use an ever-expanding ecosystem of Open Banking services. This number continues to grow at a rate of 1,000,000 new users every six months and we will soon reach the 3 million user mark.  Similarly, transaction volumes have grown exponentially, increasing from 66.8 million in 2018 to nearly 6 billion last year. As of today, hundreds of thousands of UK consumers and business are subscribing to innovative new services facilitated by Open Banking standards and protocols, making well over half-a-billion API calls each month. 

 From obligation to opportunity 

The core objective of Open Banking regulation was of course to foster increased competition and choice for consumers and businesses. It’s fair to say this competitive imperative was not universally welcomed at the time by banks, who were obliged to carry the costs and responsibilities to open up account data to approved and trusted third party providers – and thereby create an open-API ecosystem for new entrants and competitors.  

However, from obligation, sprang opportunity. With such an open playing field, the past year has seen banks and others, begin to more ambitiously explore the unique service propositions and use-cases that Open Banking provides. The wide changes to all aspects of our lives brought about by the pandemic have arguably accelerated this process. Last month the Open Banking Implementation Entity (OBIE) published research showing the rapid take up of new open banking services since the start of the pandemic, with a marked increase in small business borrowing and product switching facilitated by Open Banking. 

Banks have started to look beyond obvious simple account aggregation and payment innovation benefits of Open Banking, to explore other more creative use cases that can bring significant improvement and benefit to consumers and businesses alike. This wider potential of open banking has not been lost on the public sector also, with HMRC recently launching a request for information to explore the uses of Open Banking to deliver a wide range of public services. 

 Digital Identity 

One such potential ‘public service’ is the provision of an assured digital identity for all UK citizens – one that is secure, simple, inclusive and easy to deploy. We have a great opportunity in the UK to leverage the extraordinary potential of the Open Banking ecosystem to tackle a fundamental social and economic imperative of securely validating our personal identity online.   

Such an Open Banking based digital identity approach builds upon the proven and established open-API model. It provides a return on investment for the significant technical work already undertaken by the banks, and most significantly enables a rapid market deployment for a bank-validated identity assurance service that businesses, government and consumers so clearly need and can benefit from. 

The wide ‘social benefit’ of such a scheme is one that has motived me and my team at Digital Identity Net, and underpins the partnerships and relationships we have established, to enable the creation and launch this year of ‘OneID’ - an open digital identity platform in the UK. 

In noting the three-year anniversary of Open Banking, Imran Gulamhuseinwala, the Implementation Trustee of OBIE, observed how the existing use case functionality benefits of Open Banking “serves as a natural blueprint for how the ‘open’ philosophy can be extended” in order to give citizens “greater control and greater benefits”.  

Of all the exciting and innovative use cases that Open Banking potentially provides, a frictionless digital identity service for consumers to utilise their existing bank account data to transact online simply and securely, is arguably the biggest and most impactful opportunity to foster wide consumer adoption and acceptance of other Open Banking services. The infrastructure is in place. The social need is tangible. The solution is within our grasp.