Open banking is currently leading the way in demonstrating how we can make our data work for our benefit. It has been live for over a year now and since its launch, there has been a flurry of activity as the largest banks, challenger banks, and new and established fintechs take
advantage of the opportunity to create open banking enabled products and services. The UK’s pioneering approach has set us apart globally – we are now recognised as the world leader in open banking innovation, with many other countries following suit.
So far, much progress has been made in the small business environment where innovative products and services are already in the marketplace including tools for monitoring cash flow and accessing finance. An important contribution to this innovation was the first Open
Up Challenge in 2017 and 2018 – spearheaded by the Competition and Markets Authority (CMA) and run independently by Nesta Challenges.
The Challenge was part of the CMA’s package of measures introduced to stimulate competition in the financial sector and help small businesses save time and money, find better services, reduce stress and discover the intelligence in their financial data. Winners included fast-growing
fintech brands such as Swoop, Funding Options and Coconut whose products are frequently used by thousands of freelancers and small businesses across the UK. However, as important as it is, the small business space is just the start of the open banking revolution.
When we consider the consumer market, while there are products that are already in use it’s fair to say that take-up has not yet been widespread - especially in light of research showing UK consumers stand to gain £12bn a year from open banking-enabled servicesi. Awareness
of open banking is still low, with our latest research showing that 51% of people have not heard of it.
On the other hand, 48% of consumers say that they would be happy to use apps and tools to better manage their finances. And for those early adopters that have already used a product powered by open banking supported product the benefits are clear. 84% say
that they were surprised about how easy it is to use, and 76% said that it had helped to improve their money management. These findings are significant and present big opportunities for those fintech companies and start-ups developing open banking-enabled innovations for consumers. That’s
why Nesta Challenges, in partnership with Open Banking Ltd, has launched the Open Up Challenge 2020 - a £1.5m prize fund to encourage fintech innovators to create solutions that will help people to make more of their money.
With Open Up 2020 we aim to attract breakthrough innovations that are going to reach hundreds of thousands of people – particularly the most vulnerable – and make the benefits real. We expect that, for most consumers, the underlying technology and what it’s
called matters far less than the value that the products add, and whether they are accessible.
We’re looking for fintech innovators that can help the 15.2 million people who regularly run out of money each month, as well as the third of the population who need more help to get control of their spending. We also want to help fintechs communicate the benefits
of their innovations as this is vital to their long-term success and to unlocking open banking’s potential to change the way that the nation manages its money.
Allaying consumers’ fears is a key part of Open Up 2020. Our research shows that 56% are concerned about the risk of a fraud or a data breach when it comes to the adoption of open banking enabled tools, and 53% are worried that the data will be used for
other purposes. But once again, those who have used open banking feel differently. Of those that have already adopted open banking-powered products, 81% felt confident that the app had handled their data securely. Through the Challenge, we hope to overcome
these hurdles by helping people understand how these products can make their lives easier and build confidence in their security.
Open banking represents a genuinely new way of empowering people with their data – it is a key milestone on the journey to a digital economy and the Challenge has an important part to play in encouraging people to make their data work for them. Open Up 2020 will not
only support the UK consumers to better manage their money and take control of their data, but it will also support fintechs and innovators to maintain the UK’s position as the leading pioneer of open data globally.