Seven years after the Second Payment Services Directive (PSD2) was implemented in the UK, which made open banking a regulatory requirement in conjunction with the CMA Order, we take a look at how it has evolved over time, and what the future holds for open banking in the region.
More than 11.7 million users regularly engage with open banking-enabled products in the UK, according to Open Banking Limited (OBL), the organisation leading the UK’s implementation of open banking. Meanwhile, these users make over 22.1 million monthly open banking payments, 3.1 million of which are variable recurring payments (VRPs).
Since 2018, open banking technology has also helped facilitate around 400 million successful payments. By leveraging open banking, OBL aims to provide consumers and businesses with a simple, secure way to move, manage, and make more of their money.
Marion King, chair and trustee of OBL, said: “As we reflect on the last seven years, we should be collectively proud of the financial innovation and the benefits open banking delivers to consumers and businesses, as well as the wider economy. We’re at a pivotal stage in the evolution of open banking, with legislation and regulation coming forward that will not only put it on a commercially sustainable footing fit for the long term, but also move us towards open finance and other smart data schemes.”
This ‘pivotal stage’ comes partly as a result of the Data (Use and Access) Bill currently progressing through Parliament. This Bill signals clear governmental intent to build on open banking’s data-sharing principles to deliver a smart data economy worth an estimated £10billion over the next 10 years.
The Bill will enable the necessary Secondary Legislation to be introduced which is needed to establish the long-term regulatory framework for open banking, putting it on a commercially sustainable footing.
Transition to open finance
The Data (Use and Access) Bill should pave the way for a long-term regulatory framework (LTRF) for open banking, and the evolution into open finance.
Henk Van Hulle, CEO of OBL, also explained how this bill could help the UK maintain its leading status regarding open banking: “2024 saw unprecedented growth and delivery. 2025 will be another step change.
“This year will see the expansion of open banking into the next generation of open finance and data. UK’s thought leadership on data usage and access puts the UK at the forefront of data and payments innovation globally. We will therefore have a keen eye on interoperability, as the industry looks to enable world-class cross-border data sharing.”
The Bill also enables additional smart data schemes – open banking is the first smart data scheme in existence – with the next evolution being open finance which encompasses a wider range of financial products and services, such as investments, insurance, and pensions, and beyond into other key economic sectors such as energy and telecoms.
Looking to the future
Although new Government-ran initiatives are being introduced, the onus is also on private firms and payment providers to drive open banking adoption.
“We have come a long way since open banking launched seven years ago,” adds Tom Burton, director of external affairs and public policy at payment processor GoCardless. “Since then, we have seen sustained year-on-year growth and major milestones, such as breaking the count for 10 million users last year. But there is still a lot to do to get open banking payments into the mainstream.
“While commitments in the National Payments Vision were encouraging to see, we cannot rely solely on regulatory-driven innovation. Focusing on the here and now, in 2025 we want to see payment providers work together to kick-start a virtuous cycle that drives widespread adoption of pay-by-bank payments in the UK. This includes developing a commercial model for open banking, starting to establish a recognisable and ubiquitous brand, supporting the full rollout of commercial VRPs, and more. We’re excited to play our part to make this vision a reality.”
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