Open banking celebrated its fourth birthday last week, having experienced substantial growth across 2021.

The financial standards opened the door for fintechs, letting them work alongside established financial institutions.

Now, they boast 4.5 million regular users. This breaks down to 3.9 million consumers and 600,000 small businesses.

In addition, the number of adopters has grown by 60% in the past 12 months, from 2.8 million in December 2020. At present, around one million new regular/active users are being added every six months.

By the end of 2021, a total of over 26.6m open banking payments had been made, increasing by more than 500% in 12 months.

Open Banking was born when the Payments Services Directive 2 (PSD2) came into force on January 13th, 2018. With it, third parties could access bank infrastructure, paving the way for a wider variety of services and products.

The legislation aimed to make electronic payments more secure across Europe. This in turn would help the banking industry adopt new technology, boosting innovation and protecting consumers.

Open banking focuses on open-source technology, transparency, and privacy over user data. Through these, customers can securely share their financial data to gain more freedom over how they manage their money and makes transfers between different service providers easier.

Perhaps one of the most concrete advantages of open banking is that it allows customers to pay for services or goods directly from their accounts rather than using a credit or debit card as an intermediary.

And the year before open banking celebrated its birthday, HMRC became the world’s first government department to adopt the standards.

Chair and Trustee at the Open Banking Implementation Entity (OBIE) Charlotte Crosswell said: “The progress made by the entire industry during the past four years to make open banking in the UK a success has been astounding.”

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She added: “This wouldn’t have happened without a strong regulatory framework and forward-thinking policy makers to support our work. We have set a high standard in the UK, inspiring many other markets to follow our lead.

“Ultimately, I’m delighted that we are beginning to see how open banking is giving people more control over their money.

“The pandemic has changed consumer behaviour, with an increase in the use of digital and financial services. We continue to see customer growth alongside new and exciting products, and as even more are introduced into the market, open banking will become increasingly mainstream.

“That will be key to taking user adoption from over four million to tens of millions.”

With the pandemic accelerating the digital transformation, open banking provides an attractive alternative to traditional payment systems. Research from last year found that 74% of merchants were considering using open banking standards.

Additional research found that 93% of businesses it asked expect to adopt the data-sharing initiative in the next 12 months.

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