COMMENT
Open Banking gains momentum Neil Williams, Chief Technology Officer at LendingMetrics, says that Open Banking’s time has finally arrived.
After a gradual start, Open Banking looks like it is finally set to win wide - spread acceptance. Today, there are over five million active users of Open Banking in the UK, according to the Open Banking Imple- mentation Entity (OBIE ), up one million compared to four months ago. By 2023, it’s predicted that some 60% of the UK population will be using it on a regular basis. It seems that every month hundreds of thousands of UK consumers and businesses are becoming new users of Open Banking. API call volumes have increased from the relatively small numbers during the first year of imple - mentation to nearly 6 billion in 2020. The number of third-party providers, or businesses who use Open Banking technology, has now grown to almost 300. Since Open Banking’s launch back in September 2018 we have all been hoping that the steady but relatively
small gains in user numbers would reach a kind of critical mass and subse- quently take off. At last, it looks like this is happening. What’s more, we can expect the pace of growth to continue to accelerate. At the macro level, the pandemic has imprinted on everyone’s mind the ena- bling role that Open Banking can play when you are forced to conduct all your financial affairs online. Even those who might normally be ‘tail-end’ adopters of such technology have found them- selves having to use it and can now appreciate how superior it is to more analogue systems. At the micro level, the two most sig- nificant of factors that are set to drive growth further in the coming months are the introduction of variable recur- ring payments (VRPs) and the opti- misation of the 90-day authentication requirement from the consumer. So far, Open Banking has made life easier for businesses and consumers
who are making and collecting single payments. The very large gap that’s left for regular payments that is currently filled by direct debits is there waiting to be plugged by VRPs. VRPs will soon become another factor in Open Banking that enables third party providers to initiate a series of payments for a customer at variable amounts and intervals. Payments will become smarter, more convenient and efficient – a sort of ‘clever direct debit’. Unlike direct debits, however, VRPs can be set up in minutes rather than days or weeks and payment mandate parame- ters can be changed dynamically (right up to the point of payment) so that busi- nesses and consumers can respond to life events in real time. Payment trans- fers will be in real-time and without long processes and paperwork. Additionally, VRPs are an ideal mecha- nism to ‘sweep’ funds, for example into savings accounts or to maintain ‘smart’ overdrafts.
18 | Metrics Monthly
Q2 | 2022
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