With one in 10 consumers now utilising open banking, a new report has underscored the continued growth of open banking-enabled services across the UK.
The bi-annual Open Banking Impact report was published this week by the Open Banking Implementation Entity (OBIE) and showcased the progression of open banking adoption in the UK while defining its impact on both consumers and the country’s small business sector.
The latest figures suggest that there are currently around six million regular users of open banking-enabled services in the UK, and in the six months to March 2022, there were 21.1 million open banking payments, compared to 6.1 million in the same period the prior year.
The rise of cloud accounting
The OBIE’s third report shines a light on how small businesses are utilising cloud accounting, a form of accounting that’s hosted on remote servers Cloud accounting allows businesses to manage basic accounting tasks including, managing cashflow or issuing invoices through cloud-based software.
Open banking plays a key role as it gives companies the ability to connect their bank account to their chosen accounting service.
Although cloud accounting services pre-date open banking, it is notable that three-quarters of users started using the service no more than three years ago, with 36 per cent having adopted it within the past year alone.
Open banking made its debut appearance within cloud accounting software back in April 2019, as one of the earliest propositions.
The report identifies how the success of cloud accounting hinges largely on the incorporation of real-time transactions. According to the report, 11 per cent of respondents claim that they would cease to engage in their cloud accounting package if this capability wasn’t available, while half admitted that its absence would cause them to seek a suitable alternative; marking open banking as a highly-valued feature among adopters.
As part of the research, OBIE segmented businesses based on the number of employees to understand the penetration of cloud accounting services. While the research is not representative of the broader UK SME population, it did interestingly pick up the difference among respondents.
Among sole traders, just 22 per cent currently use cloud accounting services compared to 78 per cent of those with between five and nine employees.
The data clearly demonstrates that small businesses find that cloud accounting is playing a key role in giving insights into business performance and making small businesses more efficient and profitable, something that was agreed upon by 84 per cent of respondents.
Given the current climate around cashflow, an overwhelming majority of 77 per cent report that they now have more immediate and accurate insights into their financial position at any given time as a result of using cloud accounting services.
The fully regulated market remains dominated by propositions addressing improved financial decision-making (36 per cent), expanded payments choice (21 per cent) and better borrowing (18 per cent). However, with the implementation of variable recurring payments (VRPs) for sweeping later in 2022, it is hoped it will encourage the growth of more savings services using open banking.
Looking at the products available on the market, the data shows that 43 per cent of providers are specifically targeting consumers, whereas 29 per cent focus exclusively on small businesses, while a quarter provides for both.
Speaking in the official statement, Charlotte Crosswell OBE, chair and trustee of OBIE, emphasised the role of the Entity in the cultivation of a secure open banking system, and that the publication of its report had allowed its author to remain informed about the position of the industry.
“I’m really pleased to see the continued growth of open banking products across consumers and SMEs,” comments Crosswell. “From allowing people to get their mortgage approved more quickly to paying HMRC, utility bills or charitable donations, the products available continue to grow and are becoming more visible.”
While addressing open banking’s applicability within the financial services sector, Crosswell homed in on the rise of cloud accounting software, speaking specifically about the benefits of integrating open banking with the technology: “Cloud accounting software has been around for a few years, but it’s interesting to see the positive feedback from businesses, small and large.
“Open banking is making the service more effective and helping businesses keep on top of admin and managing cashflow. There’s certainly more work to be done to encourage sole traders and smaller businesses to adopt it, but it is encouraging to see the value it is adding.”
Industry response
With the report now available to the industry, many have hailed its long-awaited arrival with the report reaffirming the abilities of open banking.
Maria Palmieri, director of public policy at Yapily, comments: “We welcome the latest impact report from the OBIE, indicating that we are witnessing open banking’s most significant growth period to date. Account-to-account payments are up more than 300 per cent in the six months to March 2022, and the number of digitally-enabled consumers using open banking is up nearly 200 per cent from last year.
“This massive growth is just the first step of the evolution of the sector, but more needs to be done to continue this upward trend. Open finance has the potential to unlock more innovative use cases, giving millions of people access to more tailored and secure financial products and services.
“We urge regulators to embrace open finance and put forward a suggested framework as quickly as possible in order to reap the benefits for both consumers and businesses.”
Adding to this, Andrew O’Garro, Sr. VP of strategic solutions at Axletree Solutions, provides a comprehensive perspective of open banking adoption in North America, commenting: “The latest OBIE report underpins the role of APIs and data standards in enabling companies to connect their bank account to various business applications like automated payments (AP) and automated receivables (AR).
“As per Statista, 3.5 million users access open banking-enabled services in North America. This number is to double by 2024-25. A significant number, given that there is no mandate for open banking adoption in the US.
“Yes, some industry groups offer best practices for the secure exchange and usage of customer data between financial institutions, aggregators, and third-party providers (TPPs). But this alone is not enough to spur greater adoption of open banking-enabled services in the US.
“While making a payment, customers want real-time visibility and traceability from the moment money leaves their bank account until it reaches the beneficiary. In cross-border B2B payments today, customers must wait for days, if not weeks, to know the status of their payments, severely impacting their confidence, business ability and profitability. Manual processes and siloed technology systems that connect with payment counterparties periodically instead of in real-time are the reasons for this gap.
“We believe API banking can help deliver real-time information throughout the payment lifecycle. Secure APIs accelerate data collection and analytics in real-time rather than periodically as many legacy payment services currently allow.
“The Axletree Financial Connectivity platform simplifies bank connectivity and b2b payments by harnessing APIs for secure data exchange throughout the transaction lifecycle delivering confidence, visibility, and cost savings to all stakeholders. Our goal is to simplify the B2B payments experience through open banking.
“Secure and standards-based APIs, transmission protocols, and messaging formats enable third-party providers like Axletree to roll out innovative financial services and level our playing field against well-established and better-funded players. With APIs, we now focus on enhancing our core engine without building the entire technology stack, significantly improving our time-to-market and business opportunity.
“We believe greater adoption of open banking by the financial institutions will help deliver a faster, seamless, and cost-efficient B2B payments experience for corporations worldwide.”
