Open banking: The new normal

Banking customers want convenience and speed, with these areas a priority for many financial institutions. This focus has been enabled by ‘open banking’, which facilitates better account information networking and secure money transfers.

So, is open banking set to become an integrated part of the global banking system?

Claire Calmejane, group chief innovation officer at Société Générale, said: “[Open banking] business models are progressively extending all their reach – all their platforms – across multiple verticals and multiple industries.”

In the UK alone, 2.5 million transactions per month are from open banking platforms.

– Open Banking.org

Big numbers mean big change

Looking at the numbers, it’s clear open banking has seen a remarkable uptake, particularly in the UK. There, 2.5 million transactions per month are from open banking platforms. More than GB£1 billion in tax was paid through open banking platforms in the UK in 2020.

The growth of open banking may have coincided with people’s need to do their banking and business remotely, but it’s still here to stay.

“We’re finally going to be able to connect our financial lives and our financial data to the other services that we’re using online,” said Hiroki Takeuchi, CEO of GoCardless.

“We’ve seen a very big acceleration in that general trend towards the cloud,” he continued. “It’s not just a temporary acceleration during the pandemic. It’s something that we’re seeing through the other side of it as well.”

Image: PKpix/Shutterstock

For open banking to succeed, it needs to become ubiquitous

Different regulatory approaches have also created geographical discrepancies. While Europe has been quick to adopt open banking (and the US not far behind), the concept is yet to become truly global.

“What’s going to be really interesting to see is how this plays out on a global basis,” said Claire. “To be truly valuable, this can’t be just constrained to specific markets. It needs to be something that is broadly applicable – within the context of different geographies, but even within a given country.”

Perhaps the biggest question for open banking is: what’s next?

Faster, simpler payments have huge potential because, as Hiroki said, “the number of open banking transactions is skyrocketing”.

More than GB£1 billion in tax was paid using the UK’s open banking platforms in 2020.

– Global Government Fintech

There is potential for growth, also, with huge numbers of people – in the US especially – who are currently unbanked or still relying on more traditional payment methods, such as paper cheques. Open banking channels will impact many types of payments in future, though this will take time. For now, B2B is leading the way.

But leading where? Looking forward, Hiroki said: “I think that the future, from our perspective, is very much around payments. That feels like the big use case: the killer app for open banking.”

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Main image of Hiroki Takeuchi, CEO of GoCardless, on MoneyConf Stage at Web Summit 2021: Harry Murphy/Web Summit (CC BY 2.0)