Open banking is key to improving people’s financial health

The launch of open banking in 2018 promised to forge a new way for financial services. It was a bold statement of intent, and the reality is that it was never going to be possible to get people excited about what was essentially a change in the ‘plumbing’ of the financial services sector.

However, three years and one pandemic later, people are really starting to register their interest in the increasing number of digital apps and services that are underpinned by open banking data.

Despite a slow start in the early stages, we saw things move forward significantly during 2020. In fact, Experian insight suggest the number of people choosing to share their data through open banking has tripled since February last year. As a result of the pandemic, many people have turned to digital - as accessing branches, or using cash, became increasingly difficult, particularly during lockdown.

In February, Experian’s Open Data Platform saw more than 188 million data sharing requests (up from 47 million in February 2020) – 30% of the 669 million made in the UK overall.

Lenders are also seeing the benefits with recent Experian research finding that 57% of lenders have adopted open banking technology in the last 12 months, helping people manage their finances in more fluid and intuitive ways online.

People are increasingly understanding the ways their financial data can help them manage their finances more productively. They’re increasingly calling on it to support their financial management and planning – which is more of a priority than ever as we face into a second year of potential economic upheaval.

The use of these financial digital apps and services offer people new insights that can help them manage their money and access better products that they may not have been able to access before. Many of these services are also personalised or tailored to someone’s individual behaviours or lifestyles, offering a much better user experience.

Greater take up of digital money management tools also can have big impact on improving financial health – transforming the way people manage their money, helping them plan for the future with confidence. This is particularly significant given the circumstances.  Enabling people to take more financial control will be essential as the nation recovers from the economic impact of the pandemic.

The future is promising. As services mature and lenders grow in confidence over the accuracy of the data being shared - and critically people become more comfortable in some sharing theirs - we are entering a new era of open banking.

New sources of financial data, such as mortgages, investment accounts, pensions and insurance, have the potential to help people manage their entire financial footprint in one central place. It would also help them save with automated switching and renewal service personalised to their circumstances, get faster, cheaper finance, or tailored debt advice.

As we begin this next phase, open banking has enormous potential to support both business and their customers in ways that was previously impossible.