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  • Khadra Mohamed

Open Banking: The Limits

Khadra Mohamed explores the key limitations and barriers Open Banking faces in its race to be adopted and what this may mean for predictions of the implementation of Open Banking.

Research has shown that Open Banking continues to be misunderstood with only 14% of UK customers understanding this service. What is more worrying is the lack of adoption of Open banking among Business owners with 10% stating they don’t understand how Open Banking could benefit their business. This presents a key barrier which has resulted in the slow implementation of Open banking across the retail and business sector.

Open Banking continues to be heralded for its role in providing customers with greater control of their finances. However, this is dampened slightly by the slow rollout across UK businesses with only 36% of UK businesses having adopted Open Banking before 2021. This is likely a result of a knowledge gap and a lack of operational power to fully implement Open Banking indicating that the UK may be falling short of its position as Open Banking Leader. Adopting Open Banking raises several questions including how to deal with legacy infrastructure which can be a time-consuming process and key technical challenges may be seen as risk factors overshadowing the benefits of Open Banking.

The UK remains a trailblazer in its adoption of Open Banking with 81% of financial institutions positive about the adoption of Open Banking, suggesting there is a real appetite to include this within financial services. In addition, over 1 in 4 executives expect their institution to implement Open Banking, suggesting there remains a real drive to innovate existing financial services and to utilize Open Banking.

A generation gap?

Open Banking seems to be more welcomed and utilised among younger business leaders suggesting there is a generational gap, research shows that 24% of 25-34 year olds understand Open Banking compared to only 7% of over-55s. This suggests that in addition to a knowledge gap there is a generational gap which may explain why newer businesses may be more keen to utilize Open Banking while to some Open Banking remains a foreign concept. It is far easier to adopt Open Banking from the get-go rather than modifying to include Open Banking - this challenge may be seen as risky.

What can be done to combat these barriers?

To overcome technical challenges and operational risks, one solution is for financial institutions to enter into partnerships with fin-tech challengers to collaborate on tailored solutions. This is a useful path to the implementation of Open Banking as it enables key challenges to be bypassed and the rate of transformation to be sped up enabling the UK to remain a trailblazer.

Another solution is to provide banks and fin-tech start-ups with an equal pedestal in the adoption of Open Banking. Currently, there remains a clear divide within the UK for example: criticisms erupted over the UK’s Competition and Market Authority’s decision to ask the banking sector’s own lobby group to manage and oversee reforms. This resulted in uproar as many including the co-founder of Currenesea (UK’s first travel debit card) voiced concerns around conflict of interest. Creating an oversight group with equal representation of challenger banks, fin-techs and traditional banks will encourage greater collaboration resulting in the widespread implementation of Open Banking.


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