Insight: Open Banking offers opportunities for public sector cost savings – and economic growth

Henk Van Hulle,
06 Mar 2024

As the UK Government prepares to deliver its Spring Budget, there will be close scrutiny on both current and future spending plans, along with opportunities to make cost savings.

Open Banking is here to play its part. This financial innovation, which is now used by over nine million businesses and consumers in the UK, allows customers to consent to share their financial data with third-party providers, to access a range of useful products and services, ranging from budgeting tools, cost-effective lending and, for businesses, access near real-time insights about their cash flow. It also offers a secure way for organisations and consumers to make and receive payments.

There’s often a focus on how technology benefits the private sector, but the UK Government was the world’s first to offer Open Banking as a way to pay self-assessment tax back in 2021.

Henk Van Hulle

Henk Van Hulle, chief executive officer of Open Banking Limited

Now, HM Revenue & Customs (HMRC) is able to collect more than 40 different types of tax in this way. Many other government departments, universities, and local authorities also use Open Banking to collect (and refund) payments for fines, rent, and tuition and accommodation fees, offering cost savings on credit and debit card fees.

The accuracy of Open Banking payments also means, for HMRC, there are virtually no ‘suspense accounts’, where funds are unable to be allocated because of a mismatch in unique payment references. This increased accuracy helps to support administrative and cost efficiencies.

Indeed, within the first 18 months of embedding the technology, HMRC estimated it saved the public purse £500,000 in bank charges. Given HMRC collected around £3.3 billion via Open Banking payments in January 2024 alone, we anticipate there will continue to be an incremental increase in these savings.

The Government is also exploring how GOV.UK Pay – currently used across the public sector, from the NHS to police forces – could offer Open Banking as a payment option, giving people the option to pay for services using their banking app.

Last month, the Crown Commercial Service launched its Open Banking Dynamic Purchasing System (DPS), which operates as a ‘vehicle’ for central government and the public sector to source Open Banking services, helping to reduce the cost of receiving money into public sector organisations.

By reducing the fees incurred by traditional debit card payments, the DPS could help achieve savings of 70-80%. The services will also help reduce the volume of fraudulent or in-error payments made throughout the public sector.

Open Banking-enabled savings aren’t restricted to the payments arena. The Government’s Autumn Statement set out plans to kickstart a ‘Smart Data Big Bang’. This initiative aims to “explore [the] potential of utilising new powers in the Data Protection and Digital Information Bill across seven sectors: energy, banking, finance, retail, home-buying, transport and telecoms”, to unlock better outcomes for businesses and consumers, while driving competition and innovation.

These pioneering use cases will ensure the UK maintains its status as a world-leader in innovation. More importantly, the Department for Business and Trade estimates commercial opportunities created by personal data mobility have the potential to increase GDP by £28 billion.

The Budget is an opportunity for the Government to further embed Open Banking technology in its public service delivery.

We’ve seen the power of Open Banking in delivering cost savings so far, and we look forward to seeing the technology further drive these efficiencies for the good of public finances.

Henk Van Hulle is chief executive officer of Open Banking Limited