By Chris Gorst, Nesta Challenge Prize Centre


Recently (13 January), Open Banking marked its first birthday. We are now one year on in the day when new UK regulation arrived to effect allowing customers to give their consent for banks to talk about their data securely with regulated organizations. These parties can then make use of this data to develop new and innovative services to help consumers and small businesses save time and money, find better products, and bank in a different way.

This may all sound obscure, and hardly revolutionary because of the UK's long struggle with lack of competition and innovation in banking. However in truth data is the building block for many of today's most successful innovations. It's little wonder it took regulation to create banks open it up.

Designed to stimulate innovation and competition in banking, the UK's Open Banking regime is really a global first inspiring similar action all over the world and a bold move by the Competition & Markets Authority (CMA). One year on, we are starting to visit a new generation of products that introduce new ways of banking, such as bringing together all of our finances from multiple providers in a single app.

There was plenty of hype in 2021, however that open banking is solidly in place, can it yet be hailed as a success?

During 2021, 96 providers seeking to make use of Open Banking became regulated. Some of those that are already live include Emma – a mobile only solution to help people avoid overdrafts, find and cancel subscriptions, track debt and cut costs, and Funding Options – an online marketplace for small businesses that finds alternative finance options for businesses unsuitable for mainstream lending. Another solution for smaller businesses is Swoop, which simplifies and speeds-up access to loans, grants and equity funding for businesses.

But even with these kinds of solutions emerging, there is no sign yet of the major shake-up that would change how ordinary consumers and businesses experience banking. We've not yet seen the “killer app” that really captures consumers' imagination or – crucially – makes many them want to share their most intimate data.

You could reason that there has been more progress made on innovations for small businesses, which in part is owing to initiatives such as Nesta's Open Up Challenge. The Challenge was recommended by the CMA and saw lb4.5 million awarded to 25 financial companies with solutions for small company banking. These companies were fast-tracked to bring their solutions to market, through a blend of funding, mentoring, advice and new partnerships, and therefore are showing how Open Banking can modify financial services for small businesses.

So, what can we expect to see in 2021? We hope that we continue to see new innovative solutions and products entering the market and the current crop continuing to develop. But, more importantly, it needs to be the entire year of adoption – when consumers and businesses really start using these solutions widely. In order to achieve this, as well as compelling new services there is a challenge still to beat in terms of customer awareness and trust.

Some critics may state that not enough progress has been made in this space, however we are optimistic. Things have been relatively slow in 2021, partly because new entrants towards the market need time not just to develop products, but also to construct awareness and trust among users. But looking ahead, we think a bit of patience will pay off.

2021 is a big year for open banking, using the infrastructure now solidly in position and an ecosystem of innovative new players emerging. If the industry can focus on building consumer trust then we'll be well-placed for people to start taking advantage of these innovations on the much bigger scale, and Open Banking will genuinely transform how businesses and consumers manage their money.

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