March 22, 2024

Shaping the Future of Personal Finance: How the U.S. Can Learn From the UK’s Open Banking Experience

By Dan Morgan


  • American consumers could benefit greatly from the country’s upcoming open banking regulation, provided regulators learn from the UK’s open banking experience.  
  • The UK’s open banking system faced difficulties achieving its full potential due to its focus solely on payment data. 
  • The United States must account for challenges faced by the UK if it wishes to equip American consumers with unprecedented financial convenience, utility, and personalization. 

The United States is on the verge of a financial revolution with the coming implementation of an “open banking” regulation, which represents a paradigm shift that could redefine consumer financial freedom. This long-forgotten Dodd-Frank regulation offers an unparalleled opportunity to sculpt the future of finance and emphasize inclusivity, competitive innovation, and consumer ownership over financial data. As the U.S. Consumer Financial Protection Bureau (CFPB) finalizes its open banking regulation in the months ahead, policymakers must reflect on the United Kingdom’s journey with its open banking initiative. 

While the earlier UK effort attempted to spur innovation, transparency, and competition within financial services, that nation’s experience with open banking presents a mixed bag of significant achievements and notable challenges. On the one hand, the initiative catalyzed remarkable growth in user adoption and usage, with over 9 million regular users benefiting from a vibrant ecosystem of approximately 155 open banking-enabled products and services. UK Open banking has facilitated over 14.45 million payments in January this year alone. Consumers reaped substantial benefits from enhanced budget management and increased savings, and even the government benefited from new payment efficiencies. The UK’s HM Revenue & Customs service seamlessly collected £2.4 billion via open banking payment channels in 2021.

However, a narrow focus on payment data thwarted the UK’s open banking long-term potential. The limited focus curtailed the diversity of use cases and fostered market uncertainty. 

Additionally, consumers took notice of shortcomings. The UK’s experiment conspicuously failed to allow consumers to use open banking to easily switch accounts (fighting what the industry calls “sticky relationships”). Consumers’ inability to take control of non-payment-related data, including pensions, mortgages, and investment accounts, stunted open banking’s usefulness for everyday people. 

The UK is now well on the way to addressing this, setting out the groundwork for open finance and open data with the forthcoming Data Protection and Digital Information (DPDI) Bill and moving to a new open Finance trust framework. 

The American CFPB should take note and regulate for the future. To avoid the pitfalls of the UK’s system, the U.S. must broaden the scope of its open banking regulation to encompass financial data that consumers actually use in their day-to-day lives. An expansive and inclusive approach to consumer data, from investment data to public benefit accounts, will amplify the potential for market-driven financial innovation. America’s diverse consumers will benefit from taking control of their open banking data. America’s obsession with “personal responsibility” suggests that American consumers will leverage their data to make more informed financial decisions. 

As the U.S. stands at the threshold of adopting an open banking regulation, it is paramount to absorb the lessons from the UK’s open banking experience. By embracing a more inclusive scope of available data, leading the market from the front, and prioritizing financial inclusion, the U.S. can shape a future where open banking spurs superior financial products. American consumers will benefit greatly from the unprecedented convenience, utility, and personalization innate to open banking done right. 

Daniel Morgan is an experienced Fintech sector specialist with experience scaling policy functions in tech startups Plaid, Ripple, and SecurityScorecard. Dan also helped launch the fintech trade association Innovate Finance and was the lead fintech advisor for the UK Department for Trade.

More Insights

Go time: On the Doorstep of a Recession, Rural SMBs Find Success Using Multiple Selling Methods

On the doorstep of recession, U.S. rural small business sellers find success, resilience, and agility by using multiple sales methods, both online and offline.

By Hitha Herzog

U.S. Hispanic-Owned Small Businesses Are At the Forefront of Economic Recovery From the COVID-19 Pandemic

DCI Retail Fellow Hitha Herzog discusses hosting a panel discussion about small businesses using digital tools, featuring Hispanic SMB owners from across the country.

By Hitha Herzog