New Impact Report reveals increased adoption and product innovation

16 November 2023

Our latest Open Banking Impact Report (this is the fifth report) demonstrates continued growth in adoption of open banking. The data, which covers the six months to June 2023, reveals that over 1 in 9 (11%) British consumers are active users of open banking, an increase from 7% in December 2021.

It also shows the power of payments in driving the take-up of open banking by UK businesses and consumers:

  • 9.7m payments were made in June 2023, an increase of 88% on June 2022. We have seen further growth since the cut-off point for this report, with 10.8m payments made in August 2023.
  • There were double the volume of payments in the first six months of 2023 than was seen in the same period of 2022.

This is primarily single immediate payments (SIPs). Today 91% – 92% of this volume comprises SIPs – such as tax payments, wallet loads, and credit card repayments. We expect the expansion of variable recurring payments (VRPs) to provide additional growth in the future too.

Small businesses are continuing to lead the way in adoption – 17% of firms are active users of open banking, often as part of a cloud-based accountancy package.

In contrast to consumer use, data-driven services are more common than payments, and are helping firms to benefit from increased productivity, near real-time cash flow insights, and reduce costs.

Availability of services
The report also shows that the availability of open banking services is evolving. The number of third party providers (TPPs) with live-to-market services has shrunk, falling from 159 to 151, in part due to consolidation, as well as exits from the market. This shows a shift from some of the early expectations of open banking, into a more pragmatic view of where it works, and where it is sustainable.

For example, in terms of better financial decision-making (one of open banking’s key outcomes), there was some hype surrounding personal finance management (PFM) solutions. We have seen several exits in this space, and we know that a large PFM service is closing soon. There’s still a clear consumer need for these services – we undertook research which shows how much consumers value them – but it is extremely hard to create a sustainable financial model.

However, we expect to see this counter-balanced by other market entrants next year, operating in a different way, where open banking is already integrated into a product that consumers value and use.

Value of transactions
For the first time, we were able to include data from Pay.UK in our report, which showed that the average transaction value (ATV) of open banking payments is around £450, meaning the total monthly value of open banking payments is around £4.5bn. It’s also interesting to compare this with the ATV of debits, which is just £30, while the ATV of credit is £55.

Agent propositions
We identified 208 agents of account information service providers (AISPs) with live-to-market propositions, focusing on the three most common outcome areas:

  • Improved financial decision-making – 43%
  • Expanded payments choice – 14%
  • Better borrowing – 17%.

We also saw significant growth in the number of propositions that offer ‘Increased access to advice and guidance’ (22), including propositions that aim to produce insights on the environmental impact of financial behaviour, or to help users optimise tax planning.

Unique and innovative products
This market is a highly innovative part of the ecosystem, with many firms developing unique propositions for specific market needs. These include using open banking data to build a pre-qualified rental profile for prospective tenants to share with landlords, and an SME finance platform that offers funding through a revenue share model.

Other insights show that new open banking service providers are increasingly choosing to utilise the services of regulated TPPs, rather than become regulated themselves. These alternative approaches deliver cost and time-to-market advantages.

The six-monthly snapshots in our Impact Reports provide a unique view of the changing shape of open banking services – and how they play an increasing part in the day-to-day financial life of the UK. It’s exciting to see the increased adoption of open banking alongside the emergence of new providers and innovative products which help consumers budget and save more effectively, and support businesses with cost efficiencies and decision-making.