How UK policies are shaping Open Banking

From a Competition & Markets Authority investigation to FCA oversight, how UK regulation is shaping Open Banking’s future, ensuring innovation, competition and security.

By any measure, the rollout of Open Banking in the UK has gathered pace over the last seven years. As at January 2025, there were:

• 7 million active users of Open Banking-enabled products
• 7 billion Open Banking API calls made monthly
• 22 million Open Banking payments made monthly

Open Banking Limited also confirmed that the value to UK economy from Open Banking ecosystem was £4 billion. Hold that thought.

We’ll return to it as we examine what readers can expect of Open Banking in the UK. It’s a bit political…

First, some history…

Open Banking in the UK was born from a regulatory mandate. The CMA investigation into the retail banking market concluded that older and larger banks did not compete hard enough for customers’ business.

This is regulator-speak for the way banks do business has scarcely changed in years, despite technological and societal changes. The same few financial firms dominate. New entry is modest. Innovation is incremental. Products and services are static, similar across providers and to what they have always been.

Open Banking regulations were designed to increase competition in banking and payments, drive market efficiency and protect customers. Or, in the words of Open Banking Limited, to provide “consumers and businesses with a simple, secure way to move, manage and make more of their money.”

Every strong economy relies on effective payments

There’s a strong political agenda around developing Open Banking in the UK. The incoming Labour government is under pressure to revive the economy, namely getting money moving better, faster and cheaper.

In practical terms this means making it easier to buy and sell products and services at home, but also abroad. Secondly, creating a business-friendly environment, where it’s easy to set up and run a business.

When it announced plans to abolish the Payment Systems Regulator (PSR), and fold it into the Financial Conduct Authority (FCA), the Prime Minister’s Office described it as axing red tape to boost growth. And variously as a step to “drive economic growth that puts more money in working people’s pockets” and reduce the “burdens on business.”

Card fees: regulator intervenes

Similarly, the PSR published its final report into card scheme and processing fees at the beginning of March 2025. It found that Mastercard and Visa increased their core scheme and processing fees to acquirers by at least 25% since 2017, costing businesses at least £170 million extra per year.

“We have found that there is a lack of competition in the market, and evidence that Mastercard and Visa might have been able to charge UK businesses millions of pounds more than they would in a properly competitive market, impacting on their ability to invest and grow,” said David Geale, managing director, PSR.

The PSR argues that higher card fees contribute to higher costs for businesses that accept cards. These businesses may have little choice other than to pass these increased costs onto consumers, resulting in higher prices. Or absorb the costs themselves, impacting their ability to grow.

In this context, Open Banking payment for businesses is a no-brainer: quicker, cheaper, local bank payments to customers at home and overseas, with no chargebacks or interchange fees, as with cards.

Implementing a National Payments Vision

Given the political backdrop to the introduction and development of Open Banking in the UK, it’s no surprise that Open Banking has a starring role in the National Payments Vision.

The government is strongly backing Open Banking as a way for consumers to pay for goods and services in shops and online directly from their bank account.

Developing seamless account-to-account (A2A) payments will provide more choice to consumers and merchants in how they make and receive payments. And unlocking A2A payments for ecommerce is considered by the UK government as a short to medium-term priority.

Acceptance and use cases at lighthouse merchants have already driven volume and are helping to build critical mass. For example, the tax authority HMRC has processed over 10 million Open Banking payments totalling nearly £33 billion, making it the leading recipient of such payments in the UK and globally.

There’s also scope for Open Banking to further enable consumers and businesses to use their data to access personalised, tailored services and finance. The government wants the UK to be a world leader in Open Finance – the next generation of financial data sharing. It is starting by clarifying the role of regulators.

Back to regulation, again…

The regulatory responsibilities for Open Banking will be moving to the FCA. As the UK’s sole regulator in the future, the FCA will engage with other authorities as needed to support progress on core activities. These include agreeing a sustainable commercial model and consumer protections.

As it stands, the UK is seeing multi-digit growth in Open Banking usage year-on-year, higher-value B2B transactions, and better user experience, API resilience, fraud protections and transaction fees. New use cases are emerging, especially around streamlining know-your-customer/business (KYC/KYB) verification.

It is also in a strong position to explore wider uses of permissioned data sharing, a cornerstone of Open Banking, across the financial services sector. This includes savings, mortgage, pension and insurance products. The future is open.