Three years after the UK’s open banking framework reached full implementation, and two years after the EU’s PSD2 directive achieved critical mass in adoption, the results are in. They are messier, more surprising, and more instructive than the early evangelists or critics predicted.
The winners are clear enough. Account aggregation platforms like Plaid, TrueLayer, and Tink have built substantial businesses connecting consumer and business bank accounts to fintech applications. These companies form the plumbing layer of open banking, and their growth has been consistent if not spectacular. Plaid processes billions of connections annually and was valued at $13.4 billion in its most recent funding round, a figure that reflects the infrastructure nature of its business.
Personal finance management apps, which were supposed to be the consumer-facing killer application of open banking, have had more mixed results. Apps like Emma, Snoop, and Cleo attracted millions of users with the promise of aggregated financial views and automated savings features. But monetization has proven difficult. Consumers are willing to connect their bank accounts but reluctant to pay subscription fees for insights they can get from their banking app, however clunkily. Several PFM startups have pivoted toward credit products or B2B services to find sustainable revenue models.
The unexpected winner has been open banking-powered payments. Account-to-account payments that bypass card networks have gained significant traction in the UK, where the combination of open banking APIs and the Faster Payments system enables instant, low-cost transfers directly from a consumer’s bank account to a merchant. Companies like Volt, GoCardless, and Banked have built payment acceptance products that offer merchants dramatically lower transaction costs compared to card payments, typically 0.1 to 0.3 percent versus 1.5 to 3 percent for card transactions.
The losers include traditional credit reference agencies, whose grip on consumer financial data has been loosened by open banking alternatives. Lenders can now underwrite loans based on real-time transaction data from a borrower’s bank account rather than relying solely on credit scores derived from historical repayment data. This shift has been particularly beneficial for thin-file borrowers, including immigrants, young adults, and gig workers, who may have limited credit history but strong income and spending patterns visible in their bank data.
The unexpected consequences are perhaps the most interesting. Open banking has created a new category of financial fraud that regulators did not fully anticipate. Authorized push payment fraud, where victims are tricked into initiating payments to fraudster-controlled accounts, has increased alongside the growth of instant account-to-account payments. The UK’s Payment Systems Regulator responded by mandating that banks reimburse APP fraud victims starting in late 2024, a policy that has shifted the financial burden but not eliminated the underlying problem.
Data privacy concerns have also materialized in ways that early open banking frameworks did not fully address. While consumers must explicitly consent to share their bank data, the consent mechanisms vary in clarity across providers, and there have been documented cases of consumers not fully understanding the scope or duration of data access they have authorized.
Looking ahead, the next phase of open banking is expanding beyond payments and lending into insurance, pensions, and investments. The UK’s Smart Data legislation aims to extend open data principles across multiple sectors of the economy. Whether open banking’s playbook can successfully transfer to these adjacent industries will determine whether the movement achieves its transformative ambitions or remains a useful but bounded innovation in financial services.
