Open Banking API Technology in the UK – Overview & Future Forecast

Banking API Technology – The UK is the leading innovator in open banking. Globally, it has been the frontrunner in private investment and government involvement, regarding open banking. In this article, we will be focusing our attention on the open banking API tech in the UK. We’ll see how it’s impacting the overall market situation, how it’s impacting the everyday financial management of almost every person and/or business in the United Kingdom, as well as look at the upside and potential for the tech. So, without further ado – here is the overview and future forecast for open banking API for the UK.

Current Open Banking Situation in the UK

As of now, open banking is on the rise in the United Kingdom. The designated regulator CMA (Competition and Markets Authority) has made it mandatory for the largest banks in the country to allow licensed startups and firms direct access (via APIs) to their data.

Even though the EU has the more famous PSD2, United Kingdom has its own closely related directives that cover the ins and outs of open banking and digital payments.

Each year, the CMA issues over 50 licenses (the number has been ever increasing) to new software developers and open banking companies – more than anywhere else in the world. So, as things stand today, the United Kingdom is the global leader in open banking developments, as they make the best of both worlds by working together with the rapidly advancing EU to harmoniously keep their systems compatible whilst not having to struggle with union-wide integration. So, UK consumers have access to top-of-the-range open banking API tech in the UK as well.

Open Banking APIs in the UK – What are Their Properties?

Application programming interface (API, for short) is the only regulated instrument that allows two or more parties to securely exchange financial data. The API is a tool that allows two or more computer systems, or software to communicate. In the world of banking, APIs are used to transfer relevant financial information (e.g. transaction history, income, expenses) from a bank to third parties to which the user has granted consent. In return for their consent, third parties are able to provide financial services.

These services can include money management advice, spending tracking, verification for loans, referencing, etc.

With that being said, the list of available services is only expanding. More and more different APIs are being launched, allowing banks and TPPs (Third Party Providers) to offer even more benefits to users. Accessing and being able to provide these services requires passing strict checks and verifications by the FCA (Financial Conduct Authority). After a TPP is able to provide sufficient evidence that they have the necessary security architecture in place, as well as a tangible business model, they can be granted eIDAS or equivalent QTSPs license and be authorized to provide open banking services.

Open Banking API Benefits to the UK economy

If we talk about the API technology benefits and overview the status, we can’t ignore the bigger picture and its potential value to the whole banking industry and the fintech sector.

For the UK, which is slowly but surely trying to sever ties with the EU, the important thing is to maintain beneficial economic ties with the rest of the world, simplifying business and access to services. Open banking helps do that and with the inevitable historic and geographic ties between the EU and the UK, this concept is bound to bring benefit to both sides involved.

For individual consumers, API technology can help them find ways to better manage their money. AISPs (Account Information Service Providers) will help find areas where to save money. Besides, integrating AI tools with spending trackers can help everyone improve their situation.

How Open Banking APIs Will Impact the Market in the Future?

The UK legislators are always watching closely what the EU does. As of now, it seems that by the end of 2022, 90% of SMEs will adopt open banking services. With over 200 different service providers (FCA-regulated) right now, the number is bound to increase. Every week, more and more people are embracing analytical tools for their spending, using tenant referencing via open banking or just applying to get better financial services via open banking.

So, in addition to wealth management, verification, and consumer lending, it seems that open banking API technology in the UK should further expand the list of services that are accessible. APIs will likely be more integrated as time goes by and more and more areas where financial data is needed or payments have to be carried out, will be accessible through open banking APIs.