The encyclopedia · Strategy & Leadership · Strategic decision · 2016–2023
The UK ordered nine banks to open their data, and a market appeared.
After a competition investigation, the CMA made nine big banks share customer data via open APIs; by 2022 seven million people used the services.
Competition and Markets Authority · Open Banking Limited (OBIE)
The solution
The UK's 2016 retail banking market investigation concluded that the big banks held customers' financial data and that this protected their market power. Its remedy was unusual: rather than price controls, it required the nine largest current-account providers to build open APIs so data could move.
From January 2018 the CMA9 had to let regulated third parties, with the customer's permission, access account information and start payments, all on common standards developed by the Open Banking Implementation Entity. Fintechs could now build services that read and move money across every major bank.
Adoption grew from 1.1 million API calls in May 2018 to 17.5 million in November 2018; by 2022 more than seven million UK consumers and businesses used open banking, and regulators abroad began copying the UK model.
Why it worked
- A common API standard removes the network bottleneck incumbents control.
- Customer consent keeps data sharing lawful and safe.
- Payment initiation gave fintechs a way to act, not just to read.
What can be applied
When the bottleneck is a shared standard that no incumbent will build, a regulator can force the standard itself while leaving the products and services to competition.
Aftermath
Open Banking became a UK success story and template for 'open finance'; by 2023 regulators were planning a successor body and extending the model to savings, mortgages and pensions.
Sources
- Seven million people in UK used open banking services in 2022
- Britain seeks to boost banking services from fintechs
- Joint statement by HM Treasury, the CMA, the FCA and the PSR on the future of Open Banking
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