This month we focus on the growth and progression of Open Banking and how Banks are trying to attract new Current Account customers in a post-lockdown economy.
Open Banking continues to gain ground in the world of financial services
- There are now over 3 million open banking users in the UK, which equates to 5% of the population. After a slow start, open banking payments have increased by over 550% between July 2020 and June 2021.
- A recent survey found that 72% of UK firms will take more than 5 years to reach their open banking objectives. It will be interesting to see if banks accelerate their open banking initiatives given it is estimated that 60% of the population will be open banking users by September 2023.
- Open banking is set to challenge card dominance through direct B2C and subscription-based payments. TrueLayer’s latest funding round of $130 million and card schemes such as Visa and Mastercard competing for this space reinforces this idea.
Current Account competition hots up
- The Current Account Switch Service (CASS) has now completed 7.3 million switches since launch in 2013, with 50 brands now participating.
- However, we’ve seen a decline in the use of CASS with average monthly switches of 84k in 2019 vs 59k in 2020 and 56k in 2021.
- It is unclear if this is related to the Covid pandemic where we have seen an increase in savings and as a result less customers switching, or if there are other factors driving the decline in switching volumes, such as brand loyalty or lack of incentive?
- As a response to this, the large UK banks - Santander, HSBC UK, RBS and Lloyds Bank - have launched new cash switching incentives to attract new Current Account customers, which would lead to greater opportunities to cross sell other products.
- It remains to be seen if these incentives will provide a competitive edge, or if other factors make the real difference in attracting new Current Account customers. It will be interesting to see how successful new propositions such as “buy now, pay later” (BNPL) are in the current market. The market is feeling ever more crowded, with both Monzo and Revolut entering the BNPL market, as well as Mastercard and Visa.
And in case you missed it…
- UK inflation continues to rise, with it’s biggest jump since records began up to 3.2% - the rate has been tracking close to the BoE’s target rate of 2% since 2019. Forecasts suggest it will continue to rise into 2022 and then fall again in line with the BoE’s predictions.
- Return to office plans ramped up in September with the largest number of commuters in London since the pandemic began in March 2020. A majority of UK banks and building societies are adopting the hybrid model, splitting workers time between home and the office. Following months of preparation of policies and workspaces, the hybrid model is going to be truly tested now offices are opening up to near full capacity. Enticing employees back into the office was seen as by far the biggest challenge at a recent roundtable hosted by PEN (please let us know if you wish to join this industry group).
- JP Morgan’s digital bank Chase officially launched this month, while at the same time Recognise bank was granted a banking license, adding two Digitally led banks to the UK banking landscape.
- Authorised push payment fraud (APP) sees a huge increase, and for the first time overtook card fraud losses, as criminals switch tactics to avoid the automated checks within banking IT systems.
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