ADOPTION ANALYSIS:

OPEN BANKING PENETRATION

Open banking penetration - overall

The proportion of digitally active banking customers using open banking has continued to rise, reaching 14% in January 2024. This means that 1 in 7 digital customers now has an active open banking connection or has made a payment using open banking. The corresponding figures in June 2023 were 11% and 1 in 9.

During the first half of 2023, there were some indications that the growth in open banking penetration had started to plateau at around 11%. However, more recent data, from September 2023 to January 2024, have seen a clear return to growth. Some caution should be shown as January is typically always a high month for open banking penetration (in part due to the spike in HMRC payments), but even allowing for some retraction in February 2024, we continue to see strong growth.

Figure 1: Open banking penetration

Open banking penetration – consumer vs small business

As in previous reports, we continue to see higher penetration for small business customers than retail customers, although the gap continues to narrow. Retail penetration is 13% (1 in 7), whereas small business penetration has climbed to 18% (1 in 5).

Figure 2: Open Banking Penetration: consumer vs small business

Open banking penetration – data vs payments

As predicted in previous Impact Reports, August 2023 saw penetration of open banking payments overtake data penetration. Payment penetration growth has continued to grow at a faster pace than data penetration. In January 2024, 8.2% of digitally enabled customers made an open banking payment versus 7.2% who had an active data connection.

However, while the increase in open banking payments continues to be an important contributor to growth, it is important to note that open banking data connections are also starting to see higher penetration as well. From a high point of 6.9% in May 2022, data penetration had seen a slight decline to 6.4% in September 2023. However, from this low point, we have started to see a return to growth with penetration increasing to a new record high of 7.2% in January 2024.

It may be that the rollout of open banking in Apple® 2 iOS 17 in November 2023 was one of the reasons for this growth in data connections, but no firm analysis has been possible. While we know that HMRC payments in January 2024 are a factor in the high penetration of payments, its importance should not be overstated.

Ecospend Trustly, the company which works with HMRC to deliver open banking payments, revealed that over 1 million people paid their self-assessment tax using open banking payments, an increase of 140,000 against January 2023.

To put this in context, in January 2024, 5.4 million consumers and small business made at least one open banking payment, an increase of 0.7 million over the figure in December 2023.

The ‘HMRC factor’ is an important explanation of the growth in January, but there are clearly other factors at play in explaining the overall growth in open banking payments and the strong volumes in January 2024.

Figure 3: Open banking penetration: data vs payments

Note that some customers (around 1.5%) use both payments and data and therefore these numbers cannot be added together to give overall penetration.

Open banking penetration – consumer vs small business

When we look at the different adoption patterns of open banking across consumers and small business customers, it is still true to say that small business users remain more likely to be users of data services, while consumers balance their use between payments and data.

A total of 56% of active consumers are payment users versus 25% of active small businesses. The high penetration of data connections among the small business community reflects the continued importance of business use of cloud accountancy packages. (You can read more about this in our June 2022 Impact Report which focused on this use case).

Figure 4: Open banking penetration: consumers (AIS vs PIS vs both)

Figure 5: Open banking penetration: small business users (AIS vs PIS vs both)

Open banking payments growth

The number of open banking payments recorded by OBL (based on data provided by the CMA9 banks subject to the Retail Banking Market Investigation Order) reached 14.5 million in January 2024. This is a record high and represents 69% year-on-year growth. 8% of these payments were variable recurring payments and 92% single immediate payments.

Figure 6: Total open banking payments

There is no sign of a slow-down in the growth trend. Looking at full year figures, we can see that in 2023 there were 130 million open banking payments versus 68 million in 2022, a year-on-year growth of 90%.

Number of payments per user

By looking at the number of open banking payment users, we can also monitor the number of payments per active user. This figure has remained steady at around 3.5 transactions per active user per month, suggesting that growth is being driven primarily by additional users, not existing users performing more transactions.

An interesting indicator to show how far open banking payments have come is to express the total volume of open banking-initiated Faster Payments as reported to OBL as a proportion of Faster Payments as reported by Pay.UK. This indicator shows a continued steady increase to reach 4.3% by January 2024.

This should be considered an indicative piece of analysis (see Notes and Methodology for detail), but it shows the growing importance of open banking-initiated payments in the context of the UK’s payment system.

Figure 7: Total open banking payments as a % of FPS single immediate payments