The Open Banking Implementation Entity (OBIE) said UK small and medium-sized enterprises (SMEs) could gain an extra £12bn a year from open banking, with consumers set to benefit from a £6bn open banking boost.
In a report, the organisation – which was created by The Competition and Markets Authority in 2016 to deliver Open Banking – found that a total of £18bn in extra value can be created in a year by open banking if it delivers on its promise.
Open banking, which was introduced by the government, enables third-party financial services suppliers access to customer data – if the customer agrees – through application programming interfaces (APIs). This means suppliers can offer consumers and businesses financial services that suit them, and ultimately save them money.
For example, the OBIE report said people who are struggling to make ends meet could save up to £287 per year through “more tailored services which reflect their lifestyles, and simple, intuitive products that help them make sense of their lives”.
Meanwhile, small businesses get better deals, can make their money work harder, and have access to financial services previously only available to large businesses.
The report also highlighted the complex challenges ahead to reach its value creation targets.
“Many of the most valuable open banking-enabled propositions are not yet available to consumers, and there are a range of barriers which prevent these services coming to market today,” said the report.
It added that even when some of these services are available, there are barriers to overcome to get people to use them. The report said that problems such as the mis-selling of payments protection insurance (PPI) and fears that tech giants use data in a questionable way makes consumers wary.
“Consumers want to know that firms are acting with their best interests at heart in a way that is ethical and responsible,” said the report.
“Open banking could make a fundamental difference to the financial health of people and small businesses in the UK, and has shown some encouraging early signs. But the industry needs help to realise the full potential of open banking.”
Faith Reynolds, independent consumer representative at OBIE, said the time is ripe for action. “Consumers are desperate for services which make their lives easier and happier. Managing money is at best a distraction and at worst stressful and anxiety inducing,” she said.
Mark Chidley, independent SME representative at OBIE, said UK SMEs have suffered for too long from a lack of innovation, a lack of choice and a lack of tools to make them more effective.
“We want to see UK small business owners becoming more productive and successful. Open banking-enabled products can take the drudgery and guesswork out of running a business,” he said.
“It can also help the UK’s small businesses get better deals, make their money work harder and access the banking products they need more effectively. The effect on UK PLC could be transformational.”
Read more about open banking
- The government’s Competition and Markets Authority has requested feedback on proposals to increase competition in the UK banking sector.
- The Competitions and Markets Authority opens up the banking apps market following an investigation into how to create greater competition in banking.
- With the EU’s Payment Service Directive (PSD2) taking effect in January 2018, banks have no time to waste in preparing for the changes it will bring.