Insight: What does 2022 hold for Open Banking and Open Finance?

Catherine Thompson,
06 Jan 2022

We’re about to enter the fifth year of Open Banking being live in the UK, and the past four years have seen significant change. From what was once simply a concept, the popularity and adoption of Open Banking has gained significant momentum over recent years – accelerated in large part by the pandemic.

Now around four million UK consumers and businesses are actively using Open Banking products and services, and there are hundreds of third-party providers offering innovative services. But this is just the beginning.

We’ve spent the past few weeks speaking to some of the industry’s leading innovators in the Open Banking space, including Moneybox, Canopy, Formily, Nest Egg and Fair for You, to get their take on Open Banking, and what the future holds.

Based on these conversations, and what Nesta Challenges has witnessed through the two rounds of the ‘Open Up Challenge’ in 2018 and 2020, these are my predictions for what we’ll see in 2022:

  1. Adoption levels will continue to increase 

The pandemic and subsequent lockdowns have encouraged more people to become comfortable with banking digitally from home. In fact, Mastercard research found that banking apps become more popular than social media apps in 2020.

Coupled with the fact that household finances remain under strain, the demand for solutions that help people manage their finances will only continue.

Head of product at Moneybox, Ashleigh Petrie, said: “We’ve been working with Open Banking for three years now, and the improvements in that time have been incredible. There is still work to be done to increase adoption and make the process more streamlined for consumers, but we’ve made huge strides.”

While it’s important to recognise there is still work to be done to optimise Open Banking in the UK, it’s exciting to see that now the dial has shifted.

  1. Consumers demand smarter savings 

With interest rates likely to stay low, the impact of short-term interest rate boosts, bonuses and competitive rates can have a significant benefit for savers.

Open Banking-enabled savings solutions that help people identify the best deals and switch are, therefore, likely to see a significant increase in adoption in 2022.

It’s one of the areas that holds the most promise – enabling people to optimise their savings through automating switching and smart investments in line with their priorities.

With inflation also going up and hitting people’s pockets, I’m sure we’ll see a growing number of people looking for better deals on savings next year to try to counteract this.

  1. Nascent Open Finance solutions emerge for UK consumers

With many providers of Open Banking now having several years’ experience under their belts, the stage is set for solutions to broaden outside of just banking.

Seen as an extension of Open Banking, Open Finance will allow for a wider range of financial products and services to be revolutionised by third-party data sharing. While Open Banking already allows consumers to provide access to regulated third parties to data from their current accounts and savings accounts, Open Finance could take this further, giving people the power to open up more of their financial data to trusted third parties.

Catherine Thompson of Nesta Challenges

In 2022, I foresee a range of new products from leading innovators that help people manage their entire financial lives emerging – from pensions to mortgages, insurance and beyond – using existing Open Banking regulation, based on data from current accounts.

From prompting people to update or switch their home insurance when rental payments change, to reminding them to keep track (and consider consolidating) their workplace pension when their salary is paid in by someone new, we’ve been hearing about the wide range of ways existing banking regulation can support consumers to take more control of their financial lives.

As Adrian Davies, co-founder of NestEgg, explained: “The introduction of Open Finance to a broader range of financial products and services will be key to helping people to receive tailored information that supports them to make better, more informed financial decisions that benefit their long-term financial health.”

  1. We start to think about open data infrastructure more like physical infrastructure

Think of the “rails” Open Banking runs on like railway lines.

Standardisation, consistency, and regulation in railways allows for reduced costs, increased innovation impact and increased safety for passengers. If we apply these same concepts to open and smart data infrastructure, the benefits could be the same.

I anticipate 2022 will be the year in which organisations, government and industry bodies get together to build out what more unified open data rails for the UK could really look like to ensure we can capitalise on the growing momentum behind Open Banking.

The use of open data provides a golden opportunity for consumers and business owners to take control of their information and use it to their advantage, and banking was merely the start.

Written by Catherine Thompson, programme manager at Nesta Challenges