How the UK became the European pioneer of open banking

Boasting Europe's strongest open banking infrastructure, the UK is witnessing significant growth as almost 9% of the population now uses open banking-enabled services.

High digital readiness, a pro-innovation regulatory environment, and the largest number of third-party providers, alongside other factors, have propelled the UK to host Europe’s leading open banking ecosystem.

While the number of open banking users is still growing, it surpassed the adoption rate of contactless during its early years. When put into perspective: 415 contactless transactions took place every second last year and currently account for 71% of all debit card transactions.

There’s still a way to go for open banking to reach its full potential like contactless, but its impact has already made waves in areas such as payments and lending. Despite other European countries witnessing incredible open banking momentum, why has the UK continued to stay ahead?

The Open Banking Implementation Entity (OBIE)

The inception of open banking signalled a new era for financial services in the UK as banking was about to become more consumer-centric and individuals would take back ownership and control over their financial data. To ensure open banking was delivered successfully, an official framework was needed.

The Open Banking Implementation Entity (OBIE) was created to support these objectives by developing software standards and industry guidelines to drive open banking innovation and adoption. Overseen by the CMA, the OBIE’s mission was to work with the industry to develop a platform to help propel open banking forward.

The most advanced banks in Europe

UK banks are some of the most advanced in Europe when it comes to enabling APIs for TPPs to utilise. They show a commitment to improving and evolving their capabilities, as well as resolving reported issues when they arise.

Traditional financial institutions have continued to invest in open banking technology as user adoption soars. Last year, we analysed the average open banking API response times across 10 of the UK’s biggest banks. Every bank had improved its response speed, in some cases by up to 37%.

Our research also revealed that the average API response time across UK banks was 511 milliseconds - an improvement of 28% from the year before. Where higher payment volumes would typically result in higher latency, these faster response times indicate banks have invested heavily in open banking’s underlying infrastructure.

The UK’s Faster Payments System

The introduction of the UK’s Faster Payments System in May 2008 marked a significant milestone in innovation for payments.

A Faster Payment is a type of electronic transfer designed to speed up the process of sending and receiving money via bank-to-bank payments - currently used by 45 institutions that can set their limit for both business and personal account transactions.

Where Faster Payments are used most for everyday transactions, new limit rules introduced earlier this year meant SMEs and consumers could make significantly larger (and faster) payments. Improving real-time payment capabilities like this has opened up even more use cases for open banking in the UK.

Building an open finance framework

Where open banking levelled the playing field so that SMEs and consumers could access better-tailored financial services and products, open finance is taking it to an all-encompassing level.

The UK’s regulatory-led approach has brought banks and third-party providers together to maximise market participation and increase productivity across the sector, yet many questions remain around open finance.

In a truly open financial ecosystem, financial data such as mortgages, savings, pensions, insurance, investments and credit will be accessible to third parties. And when the underlying UK policy is updated more innovative use cases for open finance will be unlocked.


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