Does the Approach to Open Banking Need to Change?
Since its launch in the UK, open banking has shown promise but hasn’t reached the adoption levels anticipated. James Robson, CEO of FundOnion, believes a new approach is necessary to revitalize open banking in the UK, as outlined in The Fintech Times.
Open banking aims to foster competition and empower consumers by providing greater choice and access to financial services. However, the fragmented landscape, with each bank using unique APIs, hampers this vision. Standardized APIs and protocols are essential for seamless integration and interoperability, allowing consumers access to a broader range of financial products and services, thereby increasing competition and consumer empowerment.
The reluctance of major high street banks to lend to SMEs since the 2008 financial crisis has made financing difficult for smaller firms. The Designated Finance Platform was created to refer rejected loan applications to alternative lenders. However, it has not achieved its intended impact, with less than a quarter of rejected businesses being referred and even fewer being successful. FundOnion aims to solve this by using AI and open banking to ensure small businesses always have access to finance.
Harnessing data effectively is crucial for future growth. The UK government and the Open Banking Implementation Entity (OBIE) aim to promote data interoperability and portability, empowering consumers to control and share their data securely. This fosters innovation and competition within the financial sector. The UK can learn from countries like Singapore, Australia, and Canada, which have advanced in building a smart data economy. Continued investment in infrastructure, technology, and regulatory frameworks is necessary to support data-driven innovation.
For the UK to lead in the digital economy and open banking, concerted efforts are required. Ensuring all financial services firms operate on the same open banking footing, enhancing initiatives like the Designated Finance Platform, and driving a smart data economy aligned with global trends are essential steps. By embracing openness, transparency, and innovation, the UK can unlock the full potential of open banking and create a more inclusive financial future.