7 minute read 28 Mar 2019
Aerial view London cityscape river England UK

How regulation is unlocking the potential of open banking in the UK

Hamish Thomas

EY EMEIA Payments Leader and UK Consulting Banking Technology Leader

Transformation leader in payments and open banking. Passionate about technology’s potential to create opportunity and manage risk. Optimistic runner. Film enthusiast.

Anita Kimber

EY EMEIA Business Transformation Leader

Open banking champion. Passionate about facilitating better customer experiences through innovation and creativity. Dedicated to building a better working world.

7 minute read 28 Mar 2019

With strong regulatory direction and industry innovation open banking in the UK is off to a positive start.

This article is part of our Open Banking Opportunity Index.

Open banking is getting a boost from regulators and industry groups in the UK; indeed, no other country’s regulators are taking such a prescriptive approach.

The Competition and Markets Authority (CMA) rolled out mandatory application program interface (API) specifications for payment initiation and customer account information. It also mandated standardized formats and coding languages for APIs, and is supervising third-party providers (TPPs) via a TPP register.

This regulatory activity has spurred a thriving FinTech industry, a wave of bank and FinTech partnerships and investments, and the introduction of a first generation of open banking products and services.

Although it is still early for open banking in the UK – the regulatory rules only went into effect in early 2018 – the stars are aligning for open banking. The biggest hurdle is probably consumer sentiment. There is still a reluctance among many consumers to share their data, which is partly a cultural mindset, but also a reaction to several massive data breaches.

Regulatory involvement and consumer protections may help put consumers at ease and allow open banking adoption to take off, potentially creating a hockey stick effect in the not-too-distant future. In fact, the UK ranked first in EY’s Open Banking Opportunity Index, which assessed the readiness of 10 different markets around the globe to foster a vigorous open banking environment. 

UK open banking opportunity index ranking info graph

In the Index open banking is defined as online banking and financial services enabled through consumers ability to offer third-party providers access to their personal bank account data and payment initiation. Third-party providers can use a variety of mechanisms and tools, including “screen scraping” and APIs.

The Index research assessed four areas: the regulatory landscape, adoption potential, consumer sentiment and the innovation environment. We believe these four pillars are key indicators for open banking success.

The Index also shows that most individual markets need to strike a better balance between implementing regulatory structures, building consumer trust, and encouraging innovation.

Regulators are boosting the open banking agenda

As noted, UK regulators are taking a very active approach to open banking. It has transposed the Revised Payment Service Directive (PSD2), and the Cash Management Account (CMA) has implemented its own open banking reforms, publishing mandatory specifications, formats and deadlines. Further, the CMA has set up the Open Banking Implementation Entity (OBIE) to support industry transformation, and has created a TPP registry.

Interestingly, the UK’s approach is almost the complete opposite of that taken by regulators in China, which has taken a more organic hands-off approach. China placed second overall in EY’s Open Banking Opportunity Index thanks to strong adoption potential and consumer sentiment.

That dichotomy shows that there is no single regulatory path or approach to open banking; local customs, standards and expectations will dictate what is best.

In the UK, not only are regulators spurring institutions to adopt open banking, but their very presence may be critical to getting consumers comfortable in sharing their data and turning public sentiment in favor of open banking. 

Regulation, trust and consumer sentiment Info graph

Unlike banking customers in the UK, the consumer sentiment analysis indicated China’s consumers are happy to share their transactional data with FinTechs. While Chinese attitudes to data security may be, in large part, explained by cultural norms, it is clear that consumers perceive big payoffs for sharing information.

What feature will drive “hockey stick” adoption? 

Based on the consumer adoption analysis, and data from the 2017 FinTech Adoption index, the UK tied for first in consumer adoption potential with China. One reason is that the big banks are investing and taking the first generation of open banking products and services directly to their consumers, leveraging the inherent trust that many consumers have in their banks.

Today, these offerings are mostly in the form of account information service providers and exist in the personal financial management  space. These are entry-level features that banks will use to get customers comfortable sharing data and interested in open banking.

However, to really power adoption, banks need to decouple data sharing from privacy concerns in the minds of consumers, and align it with convenience and normal, everyday behavior.

Contactless payment is an excellent example of how adoption can create a “hockey stick” effect. A few short years ago, many consumers worried that contactless payments would lead to scams, such as digital pickpockets. Today, consumers are more likely to be miffed at the inconvenience if a shop does not accept contactless payment.

The million dollar question for open banking is what feature will offer that kind of overwhelming convenience to change behavior and drive mass adoption. One thing is certain, that “killer” feature will need to offer more than an incremental improvement.

Consumer sentiment is the biggest hurdle

According to our Index, UK consumer sentiment scored seventh out of the 10 markets we surveyed, by far the UK’s lowest score among the four pillars. The major takeaway is that while the UK is leading in establishing the regulatory framework and conditions for open banking to succeed, consumer sentiment could be a critical hurdle.

Consumer sentiment insights: UK vs. Global

The consumer sentiment analysis in our Index was derived from social media, blogs and forums. Overall, 30% of these references were positive and 12% were negative, for a net positive score of 17% (rounded).

This overall score was derived from sub-scores in three broad categories:

  • Open banking: posts mentioning “open banking” explicitly or referring to PSD2. The net positive sentiment here was 17%.
  • Sharing financial data: posts that discuss sharing of financial or bank data with third parties. The net positive sentiment was 20%.
  • Services: posts that discuss apps, tools or services of the type enabled by open banking. The net positive sentiment was 24%.

The largest driver of positive discussion was innovation, which accounted for 28% of positive posts in the market. Consumer control also featured strongly with 13% of positive posts. Excitement about the changing environment contributed 9%, closely followed by education.

But the big takeaway in the UK was around what worried consumers and thus weighed on public sentiment. In our analysis, 50% of negative posts in the UK were related to concerns about "data protection" (28%) or "cybersecurity” (22%). Innovation, despite driving large volumes of positive sentiment, also generated 18% of the negative posts in the UK.

The trick with improving sentiment, as noted earlier, may be the presence of a strong regulatory hand to maintain data privacy. That might be especially true in the UK, which has experienced some high-profile data breaches.

Engaging the public on open banking and educating them on security will be key to winning consumer trust. Banks and FinTechs will need to think very carefully about how they communicate with consumers about open banking. For example, instead of framing the question as “Will you share your data?” it is better to ask: “Would you like to see all your bank accounts in one app?”

FinTechs are thriving and innovating

The UK has a thriving FinTech industry, which is generally enthusiastic about the prospects for open banking given regulatory involvement and bank investment.

Among respondents to EY’s UK FinTech Open Banking Snapshot survey, 94% said open banking is a major opportunity, 81% are actively preparing for the opportunities it presents and 29% already consider themselves prepared. Given this engagement, it is not surprising that the UK placed third for its innovation environment, after the US and mainland China.

Open banking also seems to be changing the competitive dynamics in the UK, with more FinTechs open to partnering with financial institutions as a strategy to access customers, thus forgoing the need to build a critical mass of customers themselves. We found that 59% of FinTechs are reconsidering their strategies for collaborating with financial institutions.

Where might that innovation lead? Our snapshot survey found that 23% of FinTechs are prioritizing account and data aggregation. In addition, 16% are prioritizing enhanced credit scoring, intelligent financial management, and new payments.

Open banking’s future

Eventually, open banking should play an important socioeconomic role by helping more vulnerable, underbanked elements of UK society to access and navigate the financial markets. Open banking could be a way to more easily gather the necessary information to open a bank account or qualify for a loan, for example, or offer alternative methods of calculating lending risk. In other words, open banking could be more than just a way to push products, but a way to truly open opportunities for people and help guide good financial behavior.

Open banking was only initiated in the UK at the start of 2018, but the industry is moving forward ambitiously. For example, the Open Banking Implementation Entity (OBIE) and the top nine banks are planning to debut a mobile open banking product in 2019.

Even so, mass adoption is probably three to five years away. That will happen when consumers do not think of these transactions as open banking per se, or even a conscious act of sharing data, but as a natural way to make their lives more convenient. Ultimately, consumers may not be the ones who lead the charge. One of the main reasons that the CMA set up OBIE was to spur competition in the small business market. So it is quite possible that open banking will get its first big boost from the small business segment, which is looking to eliminate manual processes, access working capital, and work more efficiently across borders.

  • About the EY Open Banking Opportunity Index

    The EY Open Banking Opportunity Index assesses the conduciveness of open banking to thrive across 10 selected markets. Success is viewed as the potential for consumers to adopt open banking-enabled services within a market.

    Our model uses a wide range of measures — 22 indicators and 13 sub-indicators — to assess each country’s potential, across four key conditions needed for the success of open banking: regulatory environment; adoption potential; consumer sentiment; and innovation environment. 


Regulators in the UK are driving the open banking agenda aggressively, and the industry is responding by innovating, launching the first generation of open banking products. Because consumers remain wary of sharing their data and are concerned about privacy, small businesses may be the first to embrace open banking as they seek to work cross-border more efficiently. This robust ecosystem puts the UK at the top of EY’s Open Banking Opportunity Index.

About this article

Hamish Thomas

EY EMEIA Payments Leader and UK Consulting Banking Technology Leader

Transformation leader in payments and open banking. Passionate about technology’s potential to create opportunity and manage risk. Optimistic runner. Film enthusiast.

Anita Kimber

EY EMEIA Business Transformation Leader

Open banking champion. Passionate about facilitating better customer experiences through innovation and creativity. Dedicated to building a better working world.