Europe Fintech Open Finance

APIdays: Why Britain Will Lead the World in Embedded Banking

Beyond open banking compliance, embedded banking is expected to transform the future of finance. According to a World Economic Forum advisor,  the market potential for embedded finance will double the value of the current finance market worldwide from $3.6 Trillion to $7.2 Trillion in 10 years time, twice the combined value of the world’s top 30 banks.

At the heart of the embedded finance evolution is the UK, which is poised to become the global leader in this space. Here Mehdi Medjaoui, founder of APIdays conferences, outlines three reasons why.

First, the country has the most developed fintech ecosystem in the world and the biggest financial services sector. Its strong fintech hub is composed of talented banking entrepreneurs that are backed by global investors. The UK is home to more fintech unicorns than any other European nation and in 2019, accounted for 83% of all fintech funding in Europe.

Second, the UK has a unique culture of banking innovation and a legal open banking standardized API infrastructure ready to scale.

Third, the country has one of the most favourable regulatory regimes in the world. The Financial Conduct Authority (FCA) works closely with innovators to help them navigate the complex, regulatory landscape and to bring their services to market faster than most other nations.

UK has a strong startup scene, especially in Fintech

According to the latest Global Startup Ecosystem Report published by research firm Startup Genome, London ties with New York as the second biggest startup ecosystem in the world, due to the city’s access to capital, investment and global talent. The report also found that the UK also benefits from its connectivity to other global cities, especially financial hubs like New York and Singapore.

KPMG found that British fintech companies attracted over £38.4bn of investments in 2019, a 91 percent increase from 2018. Across Europe, the UK accounted for half of the top 10 deals and currently holds pole position as the top destination for European fintech investment, second only to the US globally.

And according to the last EY report, 15 of the top 29 European fintech unicorn startups hail from the UK and many of them are paving the way in embedded banking.

Revolut, for example, is creating a marketplace powered by APIs enabling third parties to build and benefit from its infrastructure and to be really embedded into their customer experience. That is the outside-in embedded banking methose, which embeds other providers onto your platform.

Another UK fintech leader, Transferwise, is adopting an inside-out embedded banking, with a new programme called TransferWise for Banks. Since banks cannot innovate fast enough to deliver a better and more affordable customer experience in money transfer services, many are now accepting to embed Transferwise’s API value proposition into their product offer.

Open banking leader

The UK has been a pioneer in establishing a legal open banking infrastructure with its open banking regulation.

Banking, insurance and finance have always been highly centralized in their hierarchy, business models and information systems. After repeatedly failing to deliver enough innovation and value to customers, the CMA ( independent department of the UK government, whose aim is to promote market competition and fairness and reduce any harmful monopolies) decided to force banks to be opened.

It announced the open banking initiative back in August 2016, and nine major banks were identified and required to create open banking APIs before January 13th 2018. These banks were chosen due to their large combined market share of over 90% of the UK’s consumer and small business bank accounts.

Unlike other nations, UK regulators went beyond just an open banking directive, describing exactly how the APIs needed to be designed, and making it easier to adopt. This led to greater success than what happened in continental Europe with PSD2 regulation. Here the standard was never properly defined, and many banks did not know how to proceed, and competing standards groups tried to define these interfaces but had far less success than the UK.

19 major banks have now adopted the Open Banking UK standard in Britain and more than 2 million UK users are directly benefiting from the regulation and the API standard.

Progressive regulator

Beyond the technical maturity aspect to the adoption, there is also a cultural aspect that the UK regulator showed during the process – one of collaboration and determination that ensured the initiative worked. This explains why Britain already has more than 189 fintechs accredited to using open banking APIs, the most of any European country. It has seen an increase of 9% in adoption between Q1 and Q2, the highest growth rate in all of Europe.

The Financial Conduct Authority (FCA) published a report in 2020 about going beyond open banking to achieve ‘open finance’ that is progressive and world-leading.

When it comes to understanding why the UK will emerge as the global leader in embedded banking, I believe that Christopher Woolard, the FCA’s executive director of strategy and competition, explains it best: “The UK has led the way internationally in the development of open banking, which supports our objective of promoting effective competition in the interests of consumers. As we look forward, we want to consider the potential benefits that could come from giving consumers and businesses control over a wider range of their financial data.”

This shows a level of commitment and maturity in policymakers that guarantees the UK’s successful long term design of the legal infrastructure to transition compliance with open banking. In turn, this will lead to real integrations and API consumption in the world of embedded banking and usher a new era for financial services.


  • Gina is a fintech journalist (BA, MA) who works across broadcast and print. She has written for most national newspapers and started her career in BBC local radio.

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