Implementing Open Banking reforms, which came into force in the UK last month could contribute more than £1bn annually to the UK economy, CEBR research has claimed.
Under Open Banking customers are given the keys to their own financial data, enabling them to change providers in minutes online with a few clicks. It also enables consumers to see all their money on one screen and access better budgeting tools.
The changes are being enforced on big banks by the Competition and Markets Authority, but six lenders – HSBC, Barclays, RBS, Santander, Nationwide and Bank of Ireland – all missed the Jan 13 deadline and were afforded more time to comply.
Lloyds, Allied Irish Bank and Danske were among those ready on time. A small number of transfers have since taken place under the new rules as lenders continue to test the new system, with a more comprehensive launch expected next month.
UK banking customers can now make their financial data available to third parties, like disruptive challenger banks. According to the Cebr study, this will increase competition in the marketplace and help boost the economy.
By charging customers interest rates that represent more accurate risk profiles, or reducing the “credit spread”, more money would be freed for use in the economy.
Cebr found that every 1% reduction in the credit spread on mortgages leads to a £153 million increase in GDP. Open banking will, it is believed, result in a 7% reduction in today’s credit spread: a total £1.069 billion in additional GDP.
“By giving customers the choice to provide their financial data to third parties, open banking is set to unleash significant innovation across UK financial services. The new standards will also increase competition and remove information barriers as a plethora of new fintech players access the data necessary to provide compelling new services,” said Truspilot’s senior vice president Glenn Manoff.
However, the research included a recent survey from Accenture, which found 69% of people may not be willing to share their data, and added that banks must earn consumers’ trust.