Open Banking could be used by over 4.8m small businesses and 32.7 million consumers by 2022 as new regulation came into effect in January 2018
There could be an influx of new players and services for 32.7 million consumers and 4.8m small businesses by 2022 as new regulation aimed at opening up the UK’s current account market came into effect in January 2018, according to new PwC research on Open Banking.
The new rules require UK banks to share current account holder data through an integration technology called application programming interfaces (APIs).
These APIs are set to be used by third parties including challenger banks, fintechs, tech companies and credit reference agencies to open up the banking industry, further improve the public’s experience with the financial services industry and spark innovation.
PwC forecasts the market could be catering for 8.1m consumers and 2.4m small businesses and worth £2.3bn by the end of 2018. By 2022, the Open Banking sector could quadruple its worth to generate £7.2bn of revenues, PwC’s research indicates.
PwC, along with the Open Data Institute, conducted interviews with executives and Open Banking leads at banks, technology firms, payment providers, FinTechs, regulators and industry bodies, alongside a survey of 1,034 consumers and 213 SMEs across the country to track developments and consumer attitudes during the first six months of Open Banking. It has also tracked 29 approved licenses to handle customer-authorised account information and payment services.
PwC financial services leader in the Midlands, Carl Sizer said there are companies starting to treat Open Banking regulation as a critical topic that cannot be ignored due to the size of the opportunity, but also because of the potential influx of competitors and the potential overhaul it could deal the financial services landscape.
By providing access to this data to third parties, Open Banking goes some way to levelling the playing field between the traditional financial services providers and new disruptors. Incumbents are at risk of falling behind more technology enabled peers as well as the new market entrants such as FinTechs.
However, incumbent payment providers are already reacting by boosting innovation, emphasising the valuable features and building on the trust that they have established and invested in over many years.
Although the initial aims of the Open Banking standards were to increase competition in banking and current account switching, PwC has tracked a broader focus on areas including reduced overdraft fees, greater financial inclusion, better control of data, and improved customer service.
