Open Banking turns 7: Reflecting on the journey here and the road ahead

It’s amazing that Open Banking, once a visionary concept, is now celebrating its seventh anniversary. When it launched in the UK in 2018, its mission was clear: to transform the financial services landscape by giving consumers and businesses greater control over their data, enhancing competition, and fostering innovation. Seven years on, it’s time to reflect on the journey so far, the challenges we've overcome, and the exciting opportunities still ahead.

A groundbreaking concept

Open Banking was introduced to address long-standing inefficiencies in the financial system. By requiring banks to open up customer data through secure APIs, the initiative aimed to empower individuals and businesses to manage their finances more effectively. Consumers gained the ability to view multiple accounts in one place, access personalised financial insights, and enjoy innovative solutions tailored to their needs.

For businesses, particularly SMEs, Open Banking offered tools for better cash flow management, simplified loan applications, and quicker access to tailored financial products. Payment initiation services emerged as a low-cost, high-speed alternative to traditional card payments, giving merchants a competitive edge.

Progress to date

The adoption of Open Banking has been slower than some anticipated, but the progress is undeniable. There are now over 11.7 million active users of open banking-enabled products in the UK, and over 22.1 million open banking payments are made monthly, a testament to its growing relevance. Across Europe, PSD2 has created a framework for similar innovations, inspiring a wave of fintech solutions that leverage Open Banking capabilities.

For financial institutions, Open Banking has been a catalyst for transformation. Legacy systems are gradually giving way to API-driven architectures, enabling banks to collaborate with fintechs and deliver more customer-centric services. This collaborative ecosystem has spurred innovation in areas like personal finance management, credit scoring, and payment processing.

Challenges along the way

The journey hasn’t been without hurdles. Consumer awareness remains a significant challenge; many still don’t fully understand the benefits or even the existence of Open Banking. Trust is another critical factor, as individuals are understandably cautious about sharing sensitive financial data, even with the promise of security.

For banks, the shift has required significant investment in technology and compliance, often stretching resources. Ensuring seamless API functionality and managing the risks of fraud and data breaches remain ongoing priorities.

Surveying the road ahead

Late in 2024, we conducted a survey at the Merchant Risk Council in Amsterdam, asking attendees about the payment trends they believe will shape 2025. Open Banking didn’t make the top three. Trends like instant payments, regulatory changes, and AI were ranked higher. Open Banking came in fourth – only 36% of respondents seeing it as a key driver of change.

This result highlights an important question: Has Open Banking’s potential plateaued, or is it simply overshadowed by more immediate priorities? Perhaps the answer lies in its future evolution.

The next chapter: Embedded Finance

Looking ahead, Open Banking’s true potential lies in its evolution into embedded finance. By integrating financial services into everyday platforms – be it e-commerce, ride-hailing apps, or subscription services – embedded finance takes convenience and personalisation to the next level.

Imagine making payments directly from a bank account within a retailer’s app, without needing card details. Small businesses could use tools that automate invoicing and provide real-time cash flow insights, all within their accounting software. This is how Open Banking can move closer to meeting real-world needs.

Collaboration is key

The future of Open Banking depends on collaboration between banks, fintechs, regulators, and businesses. Standards must continue to evolve to ensure compatibility across regions and industries. Equally important are education campaigns to build consumer confidence and trust.

Regulators also have a big role to play. They must foster innovation while safeguarding data privacy and security. Open Finance – extending Open Banking principles to areas like pensions, insurance, and investments – could be the next game-changer.

A promising future

As Open Banking turns seven, we see how far it has come but know its journey is just beginning. The road ahead is full of challenges, but the opportunities are even greater. By working together, innovating, and keeping customers at the heart of everything we do, we can unlock its full potential.

We’re proud to be part of this story. As our survey shows, Open Banking might not yet be top-of-mind, but its foundation is critical for enabling the future of payments. Let’s celebrate what we’ve achieved so far and roll up our sleeves for what’s next. Open Banking’s best years are still ahead.