New Era for UK Open Banking As Labour Plans to Boost Adoption

Now that the Labour Party’s been ushered into power in the U.K. — in a landslide vote — what’s next for open banking in the United Kingdom?

New Prime Minister Keir Starmer has promised an era of “national renewal,” and there are some key tenets of what lies ahead in financial services, and, in particular, digital innovations.

Areas of Focus

The party’s website, in discussing its plans for the sector, takes note of several initiatives:

Among the areas of focus will be a bid to “reinforce consumer protection and financial inclusion by exploring alternative models for increasing financial resilience including … a coordinated cross-sectoral approach to fraud prevention, creating a national financial inclusion strategy, and regulating the Buy Now Pay Later sector.”

With a nod to emerging technologies, the Labour Party said the U.K. will become “a global standard-setter for the use of AI in FS [financial services], delivering the next phase of Open Banking,” while “defining a roadmap for Open Finance, embracing securities tokenisation and a central bank digital currency, and establishing a regulatory sandbox for financial products to reach underserved communities.”

Challenges in Store

The ambition’s there, but the challenges are plentiful. In PYMNTS Intelligence’s report on how the world does digital, the data shows that mobile monthly “activity days” clocked in at roughly 14 days for mobile banking, and 10 days overall for online banking.

But open banking stats, from Open Banking Limited (OBL) — the implementation entity in the U.K. — shows that by the beginning of 2024, the proportion of digitally active consumers using open banking in the U.K. grew to 13%, or one in seven. Payment penetration was higher at 8.2% when compared to “data” penetration at a bit more than 7%.

“The number of open banking payments recorded by OBL reached a record high of 14.5 million in January 2024. This represents 69% year-on-year growth. 8% of these payments were variable recurring payments and 92% were single immediate payments,” OBL reported.

We’d note that at least some headwinds may be tied to fraud, which remains a sticky problem even though there was a 4% decrease in the amount stolen through authorized and unauthorized fraudulent activity in the U.K. last year, as estimated by UK Finance. The number of confirmed cases also declined when compared to 2022. Criminals stole 1.17 billion pounds ($1.5 billion) through fraud last year, down 4% year on year.

PYMNTS reported in March that as a result of fraud concerns, in the U.K., bank transfers and payments could be delayed for up to four days if fraud is suspected, in order to allow any illicit activity to be properly investigated.

A series of recent announcements spotlight at least some of the private sector initiatives taking shape across the pond. In one example,  Swedish tech firm Lenovo is offering open banking at checkout via a partnership with Trustly. The collaboration, announced this week, is open to Lenovo customers in the U.K. and continental Europe, providing them with an alternative method of payment the companies say is less susceptible to fraud than things like debit or credit cards.

Also in the U.K., Stripe has debuted an open banking-powered payment method and faster manual payouts in the United Kingdom. U.K. businesses will gain access Stripe’s open banking-powered payment method, Pay by Bank. The real-time payment method allows consumers to pay directly from their bank account.