UK Small Business Adoption of Open Banking Surges, Surpassing Consumer Use

As of January this year, about 10% of U.K.’s population is using open banking services. The number of active users crossed the 7 million mark around the same time the country celebrated the fifth anniversary of adopting open banking regulation.

A recent report published by Open Banking Limited (OBL) shows that open banking adoption is still upward as U.K. businesses increasingly adopt the technology, particularly cloud accounting software that imports transaction data using open banking.

According to the March 2023 Open Banking Impact Report, about 750,000 small to medium-sized businesses (SMBs) are using open banking products today, representing a penetration rate of 16% which is higher than the 11% recorded for consumers — a gap that per the report, continues to widen.

The report also noted a distinct difference in consumer and SMB use of open banking, with small business use largely (79%) “dominated by data-driven account information services (AIS) which allow firms to see multiple accounts in one place, providing valuable real-time insights for cash flow and forecasting.” 

Consumers, however, are “using more payment initiation services (PIS), which allow them to move money, for example, to top up wallets, or to pay tax or credit card bills,” the report explained, adding that when do they use AIS, it’s more focused money management tools that can help them budget, example. 

Other key insights provided by the report show an increase in open banking payments in the U.K., up from 25.2 million in 2021 to 68.2 million in 2022. And as of March 2023, the country also counts 159 fully regulated firms with live open banking-enabled products available to consumers and businesses.

“It is encouraging to see a continued and steady increase in the adoption of open banking products and services, particularly by the U.K.’s small firms which are seeing tangible benefits from real-time business insights offered by open banking data,” Marion King, Chair and Trustee at OBL, said about the report findings.

King added: “It is also exciting to see the expansion of services in key areas such as borrowing and financial decision-making, empowering people to make better-informed choices about managing their money, which is crucial as we face an increased cost of living [crisis].

In a recent conversation with PYMNTS, Chris Jameson, managing director, head of GTS product management EMEA at Bank of America (BofA) and The Bank of London (TBOL) Chief Markets Officer Shaunt Sarkissian discussed the need for investment and creative thinking to accelerate open banking adoption in the U.K. and E.U.

According to Jameson, breaking the open banking impasse will require “a combination of public and private,” with private entities building tailored capabilities for clients while public entities focus on developing strong open banking legislation.

For Sarkisson, leveraging the positive network effects banking groups and associations like The Clearing House (TCH) and Early Warning Services (EWS) — a U.S.-based, bank-owned digital payments platform that operates the Zelle P2P network — could serve as an effective way to drive adoption. 

“Why did Zelle have such critical mass and takeoff in the United States? It’s because it was run by [EWS] and was adopted very quickly by all the banks [which] had that power of incumbency to roll it out very quickly,” Sarkissian explained.

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