New research has found that the adoption of open banking is growing based on the rapid digitisation of finance.

According to data from global information and insights company TransUnion Consumer Credit’s 2022 white paper, financial institutions have been experiencing the highest volume of open banking transactions this year.

This was driven in part by the banking sector becoming more digitised during the pandemic.

Chief Product Officer at TransUnion in the UK Shail Deep commented: “We know that the main drivers behind open banking usage are the ease and convenience of automated processes (51%) and the fact that it is quicker to get a decision on finance applications (51%).

“Meanwhile, 47% of open banking users are motivated by not having to dig out old bank statements to open accounts.

“But open banking isn’t a standalone technology. It forms part of the consumer journey, and what UK consumers care most about is its role in providing a faster and friction-right experience, whether providers go out of their way to label it as Open Banking or not.”

Awareness of Open Banking among UK consumers is healthy, with 68% saying they have heard of it when given a definition of the technology, and 17% saying they have used open banking in the past.

Gen Z consumers are the most positive about open banking, with 42% saying they’ve used it previously and a further 32% saying they haven’t used it yet but would be willing to do so.

Despite increased adoption, there are still challenges among a minority of the population, given that 21% adults say whilst they know what open banking is, they aren’t willing to consent to it.

Getting consumers to try open banking for themselves is a key step to tackling this hesitation. Once people use open banking, they are overwhelmingly likely to be positive about the experience and of those who have used it in the past, 93% would be likely to use it again in future.

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With a focus on open-source technology, transparency, and privacy, open banking helps give users control over how their data is used. This helps finance providers verify applicants who may not have a credit history, or who might have trouble getting credit altogether by enabling a more detailed view of their current finances.

The technology can also facilitate solutions that help consumers manage their money and adjust spending habits to better cope with inflationary and cost of living pressures.

Open banking in the UK has met several milestones this year. Since marking the fourth anniversary of the introduction of the Payments Services Directive 2 (PSD2) came into force on January 13th, the standards have since reached the 5m and 6m-user marks.

In addition, open banking payments are growing 500% year on year, while May 2022 alone saw businesses and consumers make 5m open banking-driven payments.

The UK scored highly, the UK leads Europe in the adoption of open banking, based on the country’s significant political support and a pro-innovation regulatory environment. The country also boasts the highest number of registered third-party providers in Europe, promoting the development of its open banking ecosystem.

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