The CEO of Starling Bank says that open banking has failed in the UK because it does not encourage bank account switching. 50 fintech founders group challenges this claim. Both sides have good arguments.

Anne Boden, the chief executive of Starling Bank (a digital bank with 2,5 million customers in the UK) and UK Finance director, has been accused by 50 fintech company founders of stifling innovation after she said that Britain’s open banking regime had failed. She said that open banking has failed simply because it does not encourage bank account switching.

Here is what Boden had told MPs in 25 October, 2021, related to open banking:

Speaking to The Times, who first reported on the letter, Boden described herself as „one of the biggest advocates of opening up banking.”

„I believe it’s all about taking on the big banks and changing it and making things more competitive for consumers. But I speak the truth, and I’m pretty honest about when things are working and when they’re not working. I want to open the debate because if things are not working, we need to fix them, and we need to fix them in the interests of consumers, not the fintech industry.”

50 UK Fintech Founders group signed a letter in which signatories (47 are men and just 3 are women) described Anne Boden’s comments as a “dramatic oversimplification” of the situation, with open banking having the “potential to unlock even more innovation”.

Freddy Kelly, Founder and CEO of Credit Kudos and one of the signatories, told AltFi: „It’s absurd to suggest open banking has been a failure in the UK. Thousands of companies and millions of customers are now relying on open banking – and we’re just scratching the surface in terms of its potential.”

Here’s the letter in full:

Dear Treasury Select Committee,

The Fintech Founders group – and in particular those members whose names appear below – are writing to challenge the recent claim that open banking in the UK has been a failure – a claim made by Anne Boden recently when she was addressing your Committee.

This is not our view, and we believe that this view is uncompetitive and typical of banks trying to thwart the future of innovation in financial services. Although the technology has only been live since November 2018, open banking has already led to the formation of a whole host of new start-ups, raising hundreds of millions of dollars in new venture capital investment. There are now over 2.5 million open banking payments a month, compared to just 320,000 in the whole of 2018. Whilst the implementation has been far from perfect, and there are challenges – but we are still in the early stages of the journey.

Figures from Credit Kudos show that open banking enables an evaluation of a person’s financial situation and behaviour, four-times faster than how it is done without using open banking; and leads to a 15% increase in acceptance rates and 5.7% reduction in default rates.

The representation to your Committee was that ‘people want better service; they don’t want their data.’ However this is a dramatic oversimplification of the proposition provided by open banking. Open banking is bringing about significant benefits to consumers across the country: it offers people greater security and transparency, as well as a faster, more streamlined way of accessing financing.

Open banking has the potential to unlock even more innovation. It now needs to evolve realising the full potential of Open Finance as described in the Kalifa Review of UK Fintech, and banks trying to stifle this innovation need to be called out, and the market needs to continue to be educated about its benefits. The UK was a world leader in developing open banking and it is vital we maintain this advantage as part of our wider ambition that the UK retains its status as a global leader in Fintech more widely.

Fintech Founders shares the Treasury’s vision of a payments sector ‘at the forefront of technology and innovation in which the full potential of open banking enabled payments is unlocked safely and securely’, and we look forward to working with the Government to achieve this goal.