Looking ahead to the next chapter of the UK’s open banking story

It’s hard to believe that it’s been seven years since the Second Payment Services Directive (PSD2) was implemented in the UK.

While the name isn’t exactly attention-grabbing, the impact it has had specifically in relation to open banking is significant. According to the latest figures, open banking now has 11.7 million users who are making 22.1 million monthly payments.

Progress like this is why the UK is widely seen as a pioneer, accelerating ahead of its European counterparts. A host of markets around the world, including Brazil and Saudi Arabia, now look to the UK for inspiration when shaping their own journeys.

However, despite this progress, many argue open banking has stalled in recent years. There is still much to do, and obstacles to overcome, to improve consumer trust and fuel further adoption.

2025: A pivotal year for smarter data

The good news is there are several key initiatives underway that will help increase momentum. This includes the Data (Use and Access) Bill currently progressing through Parliament, which will pave the way for a long-term regulatory framework for open banking and, ultimately, the evolution into open finance.

The bill is a bullish signal of intent from the government about the importance of building on open banking’s data sharing principles to deliver a smart data economy worth an estimated £10 billion over the next decade.

As well as providing the right regulatory foundations for open banking to shift to a more commercially sustainable footing, the bill will also prompt additional smart data schemes. The next step will be open finance, encompassing a wider range of financial products and services, such as investments and pensions, and then beyond into other key sectors, like energy and telecoms.

Alongside the bill, open banking will play a huge role in the government’s National Payments Vision, which seeks to increase innovation, competition, and consumer choice in the UK’s lauded payments landscape.

The Vision sets out the opportunity to develop account-to-account (A2A) payments as a more ubiquitous alternative payment option in the UK, and how open banking can provide the infrastructure on which this expansion can take place.

But in order for A2A payments and other innovations to thrive, there needs to be appropriate, open banking-specific consumer protections and dispute resolutions in place that ensure the benefits, such as lower costs, a better user experience, and faster speeds, are not undermined.

There is a lot to be done, and it’s encouraging that the Vision Engagement Group includes representatives from the financial services sector, who can work alongside the government and regulatory bodies to ensure that its work is informed by views from, and progressed in partnership, with the industry.

Bringing consumers on the journey

Despite these developments, consumer trust remains a barrier, especially when it comes to people agreeing to open up access to their data in order to reap the full benefits of innovations like open banking. This is a big challenge for banks and other providers, with CRIF’s research showing just 53% of UK consumers have faith that their financial institution will look after their data properly.

Interestingly, this is significantly lower than the figure in the US (72%) and European countries, such as Italy (74%). This highlights the fact that the UK financial services ecosystem needs to do more to reassure consumers that it has robust data hygiene processes in place.

Even though there is a widespread lack of trust, our research also reveals that UK consumers are open to sharing their data if it leads to better fraud protection and more suitable financial products. This is particularly the case for younger demographics, with two-thirds (64%) of 18-34 year-olds willing to share more data in exchange for enhanced security. Similarly, six in ten (59%) young adults would share more data if it helped them to access financial products at a cheaper rate, while 62% would do so if it boosted their credit score.

The will is certainly there, but there will need to be more education for consumers. Whether it’s the extension of smart data schemes as open finance matures, or the roll out of new tech-led innovations around payments or unlocking better rates on financial products, the benefits must  be clearly communicated.

Such educational endeavours will need to be a collaborative effort between policymakers, financial institutions, and fintechs to achieve the required cut through. By working together, we can ensure the next chapter of open banking builds on the last and helps maintain the UK’s position as a leader in the field.