After Open Banking reached 10 million consumers and SMEs at the end of July, FStech news editor Alexandra Leonards speaks to Henk Van Hulle, chief executive of Open Banking Limited (OBL) about how the industry reached this milestone and what the future looks like for Open Banking.

Congratulations on Open Banking reaching 10 million consumers and small businesses – what do you think it has taken to achieve this?

This has been an extremely joint effort. Things needed to be standardised and this was very helpful for adoption because the more centralised and standardised the propositions are, and the clearer they are, the better.

I think that's quite important because one of our functions is also to promote the Open Banking standards publicly in the market and ensure they are monitored and delivered. We of course want a consistent customer experience across the board, so there isn’t a case where with one bank you have to wait five seconds for a response, while another takes nanoseconds.

You need to find a way of monitoring the standards and finding out whether they adhere to the minimum levels of those standards while also ensuring there are benefits for the end users because if not, why would you ever give consent to use that data. There are many things needed to get to that success.

Once standardised, it creates an environment for both innovation and competition, and more innovators are there. Right now, we have an ecosystem of about 345 players, of which around 93 are financial services organisations. The rest are all innovators or FinTechs and so on. This is now a vibrant, growing ecosystem.

Everybody is hopefully following the rules, so we will ensure that there is no rogue player in this. If there is, the Competition and Market’s Authority (CMA) and other regulators will help us give directions.

In terms of growth, we've seen a massive uptake from small and medium sized enterprises (SMEs). One out of five SMEs and one in seven consumers in the UK are taking up Open Banking, with an increase of about 66 per cent over the past 18 months. We had around six million users a year and a half ago and now we have 10 million.

We're six and a half years young – it’s still a young industry and having started from nowhere it’s only taken this amount of time to get to 10 million. The industry now employs about 5000 people in the UK, and we’re creating a value of over £4 billion to the economy.

The biggest use case we have so far perhaps is still payments. We see now that payments has overtaken data and information. So, the good news is it's not only about data anymore, but also about what do you do with the data.

Tax payments with HMRC is also a big use case for us. Around £3.5 billion in tax has been collected via Open Banking payments from January alone. We see more and more payments in Open Banking and variable recurring payments (VRP), which is going to be quite a game changer going forward.

It has taken over six years to get here – will it take another six to reach 20 million, or do you anticipate faster growth in the coming years?

I don't think it will take another six and a half years. We’ve seen growth of three or four million in just a year and a half. It’s 10 million out of an active, let's say roughly 50 million using banking apps (which is positive thinking) but that’s already 20 per cent, which is quite significant penetration.

With VRP, when a person or an SME has given consent once, this could actually lead to many transactions and many payments. Some of the existing customers already give us permission to make 10 payments, so you see very quickly how that can snowball in the future.

We also believe that the agenda of the Joint Regulatory Oversight Committee (JROC) is going to level up Open Banking because it will very likely expand beyond the nine largest UK banks. All 93 will need to adhere to the standards as well.

Another element which is important in our business is the Digital Information and Smart Data Bill – that will enable us to further unlock the value of Open Banking because that will give us a regulatory framework so that data powers are given to the regulators and more participants will adhere to the standards. This means more propositions can be developed faster by innovators. More competition and innovation will lead to growth, which also ties in nicely with the agenda from the government in terms of economic growth as well.

The growth of Open Banking has been driven by competition. Can you give some examples of where you have seen best practice here? Who are the leaders in this field?

I already mentioned HMRC, but I think other use cases include those focusing on account-to-account (A2A) payments, as well as sweeping and paying off bills.

We also see more and more responsible lenders involved in Open Banking because they can make thin credit files larger to help them with their decisions about suitability or affordability.

We had one organisation with a particular focus on indiscriminatory or non-discriminatory lending, where they lend to NHS workers or public servants to tie them over for a small amount, even for £1500 for instance. They do that based on Open Banking data, but they also enrich it with other APIs and they come to a conclusion. I think about 75 per cent of their customers are women. On top of that, it’s not only able to help with micro-loans but they can also check for state benefits they may have missed or that they could have claimed. We’re seeing more and more development in ‘Open Banking for good’ propositions.

What are some of the most creative ways you’ve seen Open Banking used this year?

Increasingly we see premium APIs being added, so more bespoke private information that some organisations might have and that is really wide-ranging. It even goes from the banks themselves having internal use cases to some of the bigger players – credit agencies and others – trying to include their information and our information to make better decisions in terms of fraud prevention.

Then there are other areas such as accountancy and I think accountants are getting a new role in the future. Their role is changing because more and more is now digitally available to them. Through Open Banking being included in cloud accounting software, there is now a complete overview of certain SMEs, sole traders or others. Then the business owner or the innovator can be busy doing what they like to do, being creative and doing business. They can now be the hive of all that activity, their day-to-day business, and they no longer need a box of receipts to give to their accountant or bank anymore.

The creativity there is that the innovator gives delegated powers to the accountant to do what they need to do. They can avoid late payment fees and optimise their cash flow within the organisation. This accountant now gets the complete overview of an SME – and they can match it with a whole-of-market overview. As a result, they can then identify a better offer out there on a loan or access to capital for that SME.

So, there is a big request by many parties – the SMEs themselves, the government etcetera – to understand how we can unleash growth by also trying to ensure that we get capital, lending or other ways of financing to SMEs.

If you overlay for instance, Open Banking standards with, for instance, APIs from HMRC or Company’s House, very quickly it will be much easier and quicker to release funds to those SMEs. To achieve this, you have to have smart data schemes in place, hence the support of the Digital Information and Smart Data Bill, but you also need to make sure that more information is standardised and accessible from public services such as HMRC.

And if, for instance, you get the hard facts on VAT returns for SMEs, you can make better decisions because you know the history very quickly of that company, however that’s not available right now – this is one of the requests.

The industry is providing information and the public sector might need to provide information to help make better decisions.

How will the upcoming Digital Information and Smart Data Bill impact Open Banking?

The predecessor, the Data Protection and Digital Information bill was in its last stages in the House of Lords under the Conservative government but it didn’t make it through because of the election. So, the unfortunate thing is that it has to start all over again.

We are a member of the Smart Data Council so we have requested the new government to prioritise the new legislation, the new Digital Information and Smart Data Bill, so that it can go through more quickly.

It has gone through the houses before, so we assume it might be a bit easier this time around. However, they need to start the process and prioritise it – this is our main message, particularly to the secretary of state for the Department for Science, Innovation & Technology (DSIT) Peter Kyle and the secretary of state for the Department of Business (DBT) and Trade Jonathan Reynolds. We need our own city minister Tulip Siddiq to promote this as well.

We’re calling for this to be prioritised because it could unlock the smart data economy in this country, which according to the DBT would increase GDP by $28 billion.

It will also enable us to give powers to the different regulators. If we want better propositions and better energy deals, for example, then that data needs to be shared so that would involve mandating the sharing of smart meters data, for instance, as long as permission is given. That will be enabled, but right now no one can actually force those firms to do that so to unlock the power and value of data we need the bill to go through.

At this stage, what is holding back some consumers or small businesses from engaging with Open Banking?

We believe we have built a strong trust framework because it’s a digitally native ecosystem. If you don't know the other party you're dealing with, you're not going to trust it or give permissions. We need to maintain the trust and broaden it, as well as promote the ecosystem more.

I think we need to also need to remind people of the benefits of Open Banking. It’s not only safe, but there are benefits. That comes down to a lot of clear use cases and value propositions which are out there.

For charities the use of Open Banking is quicker; it's less fraudulent; and it's less expensive than other systems. So, we need to keep on hammering this point across.

For me, more B2B promotion is needed, rather than just getting the point across that the end user will benefit.

We also need to show there are a lot of benefits for SMEs like cash flow optimisation or late payment fee avoidance where you don’t have to pay because you’re on top of your game. Because of the all the information which is standardised now, you can get a quicker loan with lenders because you can give that information in a more digital format to them at a quicker pace and to their accountants as well.

There's still a lot of promotion to be done I think in terms of adoption and we need to keep on sparking innovation because that's what is going to trigger more use of it.

It’s promising that our penetration is now higher across businesses than consumers; that's literally been overtaken just in the last year. I think this has a lot to do with payments.

I know a chief financial officer of a wholesale plumbing company who’s said from now on 100 per cent of his plumbers need to be paid through Open Banking because it saves him money. He has the money immediately. There is no fraud, and he doesn’t have to pay card fees.

You mentioned earlier that the Open Banking ecosystem is now worth more than £4 billion to the UK economy. How much do you anticipate it could be worth if it is properly maximised?

The Department for Business and Trade (DBT) has said that Open Banking and smart data schemes collectively have the potential to add £28 billion to the UK economy.

If we more than double or even treble Open Banking it would be worth £15 billion. You could even double that again by expanding with better finance and other use cases like energy.

Energy is another big one which has a lot of potential across net zero reporting, optimisation of the grid, and energy switching.

It’s important to create that awareness with the government of its value proposition because it is ultimately trying to create growth without spending money, because there is no money.
As an independent platform trying to resolve this for them through Open Banking, this is an opportunity to do much more without having to spend a lot of money. All the pipe work is already there, we just need to connect.

What’s next for Open Banking and OBL over the next 12 months?

With Open Banking, we have an agenda the Joint Regulatory Oversight Committee (JROC.) I'm chairing the JROC non-Order Programme Workplan Implementation Group (JWIG) for instance, with six trade associations, and with end user representations such as Which? and the Federation of Small Businesses (FSB), as well as JROC, my own board, and Pay.UK. We have also found 20 companies who will fund the next stage of Open Banking.

There's a lot of people I need to manage to move this forward, but we have an agenda and a work plan and governance in place to do that. Importantly, we have a clear view of how we’re going to move Open Banking forward.

We’ve just released the latest version of the UK Open Banking Standard V4.0 which aligns with international security protocols. It’s very important that our UK Open Banking Standard is interoperable with international standards. Our latest release puts us ahead of the game there.

Going forward, we're going to focus much more on fraud prevention and enhancing the APIs for this. The more information we share, the more we can do to tackle fraud.

In terms of variable recurring payments (VRPs) – flexible Direct Debits –that's quite high on our agenda and we're going to move that forward quite a lot in the coming six months in the industry in the UK.

Then in the longer term once the smart data power is in place the regulators are developing a future entity which will be under the supervisory of the regulators. That future entity will then run a series of smart data schemes not only on Open Banking, and other schemes in key economic sectors such as energy, telecoms and transport going forward.

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