Thousands of people across the UK are watching their financial security plummet in real time.
“The next few months will be tough,” UK Chancellor Rishi Sunak warned last month, as he and his government scramble to ease cost of living pressures on the country.
Skyrocketing inflation – driven by rising prices in energy and food – is being felt in every corner of the UK, forcing consumers to change their personal finance habits to reflect these difficult circumstances. Recent research from the ONS shows that nearly one in five people (17%) are borrowing more than they did a year ago, and a worrying 43% said they would not be able to save money in the next 12 months.
Whilst some consumers are turning to personal finance experts for sorely needed advice, a crucial puzzle-piece is not being spoken about enough: open banking.
Millions of people are stuck using ineffective financial services or prevented from improving their lives due to poor access to the right financial products. There is a human face to the cost of traditional financial services: credit-worthy borrowers unable to apply for loans due to the spiralling effect of low credit; thousands of ‘unbanked’ individuals who cannot apply for basic finance, government support or mortgages; banking customers like you and me having less control over our data and finances. Here’s where open banking comes into play.
Open banking has the power to transform the financial wellbeing of millions of people. In the context of inflation, unprecedented energy prices and tax hikes, responsible lending has never been more important. Open banking is a force for good, improving affordability and transparency to help people break volatile debt cycles and ultimately access the right financial products and services for them.
Fundamentally, it offers people the chance to receive tailored support with money management by allowing regulated companies to securely access and analyse their bank account data. With the consumer’s consent, open banking allows third parties to grant companies that need it access to users’ bank account data, so they can provide more personalised products and services to their customers. And it’s a model that works – just ask the five million regular users of open banking in the UK now enjoying flexible, tailored and secure financial solutions.
In just four years, the UK has seen open banking deployed through dozens of apps and products that can aid in clearing debt, financial planning and providing more control in successive months of uncertainty.
The issue remains that until open banking is more widely adopted, consumers and businesses may find control of their finances is just out of reach. If the Chancellor’s words are a harbinger of what’s to come, we will need to see a significant step-change in open banking regulation to cushion the blow of this inflationary pinch. It is essential that the government accelerates the development of a fair and forward-looking open finance framework and implement a governance structure for future regulatory entities that will encourage growth.
Everyone deserves to be able to access money management tools and take control of their finances. The open banking revolution is on the precipice of fundamentally transforming the way people pay, access and manage their money for good. A sustained and deliberate drive towards open banking can help ease the burden of the cost of living crisis in months to come. But to achieve this, we’ll need to see a concerted effort from regulators and the government to propel the UK out of the crisis and into financial freedom.