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The Rise of Open Banking

The streamlining of financial services has accelerated to a remarkable degree – and brought some much-needed resilience to the sector during a global crisis.

Posted: 28th January 2021 by Finance Monthly
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Wayne Johnson, CEO & co-founder of Encompass, explores trends in open  banking and their implications for financial services in the UK.

The UK banking industry faced some serious challenges throughout 2020, as financial institutions responded to restrictions on business activity designed to stop the spread of COVID-19. Crucial to this response was the fact that we had the technology and infrastructure available to facilitate remote operations and digital banking, particularly during a time when customer need was greater than ever.

The popularity of open banking has surged in recent years, paving the way for fintechs to provide seamless access to cutting-edge financial management services. It is a secure way to give authorised third-party providers access to financial information from banks, such as spending habits and regular payments, with the aim of helping people to understand financial needs and find new products and services to help customers.

At the beginning of 2020, the main goal for banks in the UK was to continue pushing towards more mature, scalable, and resilient open banking plans so that they could still compete with players in other markets. However, after the global pandemic hit, banks had to turn their attention to health and safety, dealing with branch closures, remote working, and efforts to support their customers and clients as thousands of businesses had to close and jobs in all industries were on the line. A benefit of open banking is that it allows financial data to be shared across everyday financial life, making banking more convenient. Now that 1 in 4 millennials and gen-Zs are using challenger banks, it is clearly a desired way of using services, and inevitable that more banks will use open banking to provide a better customer experience.

Many organisations that customers share data with could be budgeting, lending services or other banks, as well as various fintech companies on the market to consumers. Open banking is therefore very advantageous to the fintech industry and will likely contribute to its growth in the UK as the data provided will be much easier for start-ups to see and use. Since the outbreak of COVID-19, Open banking’s benefits have taken on a new significance. Now, open banking can be considered as a powerful tool in helping finance providers evaluate cost efficiency during difficult times and as consumers face changing circumstances.


With the current pressure on personal finances, and three out of five UK households negatively affected financially, Open Banking can help obtain an accurate view of the consumer’s financial situation which then helps them make important decisions and gain additional insight to help tailor products for individual needs.

In 2021, the focus of the finance sector will likely be on improving the digital experience, and we have already seen that there has been a major shift in the fintech ecosystem, with it seen by many as a source of potential innovation for banks, rather than a direct competitive challenge. When it comes to open banking, this is only the beginning. Despite the industry still being in the early stages of implementation, there is increasing interest in moving beyond this to include a far broader spread of financial products. It is also likely to encourage a shift in regulation through the increased demand for transparency, with RegTech here to help solve the problems of regulatory compliance.

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