A NatWest report has called for collective action from stakeholders to overcome hurdles preventing the broader adoption of open banking in the UK.
The report, produced by Oxera, highlights key issues such as a lack of commercial incentives to develop new use cases and inconsistencies between banks regarding the benefits of open banking.
Since its launch in 2018, open banking has seen a moderate degree of success, with over seven million businesses and consumers utilising it. Despite this, it only accounts for roughly 10% of consumers and SMEs, with open banking payments being substantially outperformed by traditional payment methods like cards or direct debits.
Three potential solutions are proposed in the report: requiring banks to provide a broader range of open banking use cases, urging banks to broaden open banking use cases through premium APIs, and initiating the development of a new multi-party system. It also identifies significant challenges in managing trade-offs, such as between security and convenience, within the open banking ecosystem.
The report recognises that different use cases may require different approaches. Some may benefit from a combination of strategies, such as mandating the development of an API while allowing its commercialisation to be managed by banks themselves, or by a multi-party system.
Head of Bank of APIs at NatWest, Claire Melling, said, “This report makes it clear that banks, fintechs and regulators need to work together to design new, flexible frameworks and commercial incentives that will support a far wider range of open banking use cases. By acting on the recommendations in this report, we can enable open banking to reach its full potential and, ultimately, deliver new and enhanced propositions that will improve customer choice and experience.”
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