UK Hits Open Banking Milestone Amid Lingering Doubts About API Performance

About 10% of U.K.’s population used open banking services in January.

Data from a recent report by Open Banking Limited (OBL) shows that the number of active U.K. open banking users crossed the 7 million mark earlier this year, around the same time the country celebrated the fifth anniversary of open banking becoming a regulatory requirement under the European Union’s Revised Payment Services Directive (PSD2).

Commenting on the milestone figure reached this year, Marion King, chair and trustee of OBL, said the technology has not only been “good for the nation,” but has also increased competition and enabled consumers and small and medium-sized businesses (SMBs) “to benefit from new and innovative ways to manage their financial lives.”

The report also shows that about 17% of the 7 million active users are first-time open banking users, a development which OBL CEO Henk Van Hulle further described as significant. “From access to cost-effective credit, building a regular savings habit or making more informed financial decisions — Open Banking is delivering the means for our citizens to improve their financial wellbeing,” Van Hulle said.

Beyond its potential to enable instant account-to-account (A2A) payments across Europe, the technology could also spur real-time services in the region, a feature only offered by a few banks in the region, some of which charge an additional fee.

However, a draft proposal published by the European Commission (EC) last October is expected to change that and mandate banks to offer instant euro payments without the ability to charge extra for the service.

As Tom Greenwood, CEO at open banking firm Volt, told PYMNTS, such an amendment to the Single Euro Payment Area (SEPA) regulation will have a “tremendous impact on open banking payments adoption, unlocking new use cases for account-to-account payments, including in physical in-store retail settings.”

Open Banking Not Business-Friendly

Despite the acceleration in the uptake of A2A payments in the U.K., opinions about the success of open banking use have been divided.

In an interview with PYMNTS, Laurent Descout, co-founder and CEO of Barcelona-headquartered business-to-business (B2B) neobank NEO, argued that apart from the lack of multicurrency management solution for EU-based businesses, most of the investments made by financial institutions to upgrade their systems did not take into account the needs of corporate clients.

“For a corporate treasurer point of view, it’s either you have everything or it’s useless if you just have part of it,” Descout explained. “And that’s the problem of open banking, it’s way too fragmented, and I don’t think that will change soon. Unfortunately, there’s been a lot of talking but very limited application so far.”

Andy Mielczarek, co-founder and CEO of U.K. digital bank Chetwood, did not provide a glowing review either when he also spoke to PYMNTS last year. For example, he pointed out how the technology introduces friction into the customer journey and has performed significantly below expectations since the regulatory mandate went into effect in 2018.

“Open banking in the U.K. has been disappointing. If you look at Holland, for example, the permission customers have to give to access their data is way easier, whereas the early implementations of open banking in the U.K. have felt like a phishing attack,” Mielczarek noted.

James Hickman, CCO of Trustly-owned open banking provider Ecospend, remains optimistic, however. In comments emailed to PYMNTS Tuesday (Feb. 21), he said that while “we have yet to see the UK meet an inflexion point,” the 7 million milestone is an indication that “we are fast moving in that direction.”

Hickman added that as the advantages of A2A payments, including speed, efficiency and safety, lead to an exponential growth in the use of open banking services, “we are likely to see use of this form of payment supersede other more traditional forms in the not-so-distant future.”

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