The Open Banking boom: trends and growth

Understanding the forces behind Open Banking’s rapid growth, the opportunities and the future.

As Open Banking turns 7, we look at the growth and adoption of better banking, done faster, plus assess the overall direction of travel.

Open Banking: a brief introduction

Open Banking describes a way of securely sharing data held by banks, if customers consent to this. Some countries mandate a standardized format for this data-sharing.

Better bank payment is just one of the stand out use cases of Open Banking. That’s why Open Banking payments are sometimes described as account-to-account payments or A2A for short. Or even pay by bank.

Open Banking, account-to-account or pay by bank payments work the same. Quite simply, funds move directly from one bank account to another. This makes paying and getting paid quick, convenient, safe and secure for customers and businesses.

In this article, we examine:

1. What have been the main developments in Open Banking payments over the last 12 months?
2. What is driving Open Banking adoption?
3. What will further accelerate Open Banking adoption?
4. How could Open Finance transform Open Banking adoption?
5. How could embedded finance transform Open Banking adoption?
6. What’s the difference between Open Banking and banking-as-a-service? And how could banking-as-a-service transform Open Banking adoption?

1. What have been the main developments in Open Banking payments over the last 12 months?

With over 11.7 million active users and more than 22.1 million payments made monthly, 2024 has been a year of rapid adoption and strong growth for Open Banking in the UK.

In Europe, Forrester is estimating that Open Banking adoption will double between 2022 and 2027. Sweden is on track to have the highest number of Open Banking transactions per person by 2027, and the UK the largest number of total users.

Meanwhile in the US, the consumer finance regulator finalized long-awaited Open Banking rules in October 2024. With more than 4,000 banks and a highly fragmented market, the consumer financial protection bureau hopes Open Banking will foster more open competition, drive market efficiencies and protect consumers.

2. What is driving Open Banking adoption?

If we’re being nit-picky about it, direct bank-account-to-bank-account transfers have existed for more than 50 years. However, they’ve recently been rebooted by real-time technology and rule changes.

Real-time technology is speeding up money movement. Funds increasingly arrive in – you’ve guessed it – real time. So, seconds, rather than hours or days. This also works internationally for cross-border bank transfers.

Rule changes mean new, secure sharing of bank data, mostly via APIs and always with customer consent. The interplay of rules and technology is delivering faster, more convenient and secure bank-to-bank payments.

3. What will further accelerate Open Banking adoption?

As more businesses offer Open Banking, pay by bank and account-to-account payment options, so more consumers and businesses will use them. And vice versa. As more consumers and businesses use Open Banking payments, so more businesses will want to offer them.

Adoption by lighthouse merchants, such as the UK tax office, helps build critical mass and prove the concept just as TfL, the mass transit operator in London, rolling out contactless payment did for contactless.

Improvements to the Open Banking proposition, business models, revenue streams, consumer protections, regulatory harmonization and collaborations will further accelerate adoption.

4. How could Open Finance transform Open Banking adoption?

Open Finance could accelerate Open Banking adoption.

If Open Banking is about customers asking banks and payment companies to share their bank account data in a secure, standardized way, then Open Finance expands the scope.

Think: savings, investments, pensions, mortgages and insurance. After all, a customer’s financial footprint is bigger than their bank account.

The European Commission is working on a legislative framework for Open Finance. This will establish the rights and rules around how customer financial data is accessed, shared and used.

Meanwhile in the UK, the Competition and Markets Authority (CMA) officially confirmed a roadmap for Open Banking in 2024. This will allow the government and regulators to extend the benefits of Open Banking to other sectors, including energy, telecoms, pension, retail, mortgages, transport and insurance.

The could have a halo effect on the original Open Banking concept, boosting take-up.

5. How could embedded finance transform Open Banking adoption?

Embedded finance is generally offering financial services in non-financial contexts when customers need it most. For example, buy-now-pay-later loans at the point of purchase, insurances offered when renting an apartment or buying a car.

Open Banking is better banking transfers, done faster. It’s the technical rails on which providers run services with permissioned data sharing at its core.

Open Banking could power embedded finance applications by connecting customers to their money. And vice versa.

More businesses have the scope to embed financial services into their platforms and customer journeys, even if they’re not banks or payments companies. This could boost Open Banking, pay by bank and account-to-account payment adoption.

6. What’s the difference between Open Banking and banking-as-a-service? And how could banking-as-a-service transform Open Banking adoption?

Open Banking is about banks sharing customer data in a secure, standardized way with other organizations, generally through APIs, if customers consent to this.

Banking-as-a-service is providing banking and banking-like products and services to non-banks through APIs.

These bank-in-a-box or plug and play services help businesses get to market quicker and more cheaply. Well-known fintechs and neobanks, such as Revolut, Monzo and others use banking-as-a-service technology.

While both use APIs, Open Banking is a permissioned data-sharing layer that sits on top of banking infrastructure. Whereas banking-as-a-service is infrastructure behind the scenes that makes banks work.

As a result, banking-as-a-service infrastructure is less likely than Open Finance or embedded finance to boost Open Banking adoption.