Preparing for open banking’s time to shine: Reflections on 2022 and what’s ahead for 2023

Throughout 2022, we’ve seen the economy shift dramatically across the world, and particularly in Europe, while shifting geopolitics have created widespread macroeconomic uncertainty. As a result, people have leaned on digital tools to make managing money easier to understand and more convenient –this was true during COVID, and according to our latest research, remains true today. In response to this turmoil, people in the UK are actively using fintech to manage their financial stress: 41% of respondents say fintech enables them to understand their spending so that they can better manage their money, a 5 percentage point increase on last year (36%). 

While this turbulence means many people across the UK and Europe may turn to a “back to basics” approach to finance, that doesn’t mean abandoning digital tools. In fact, the tools that open banking helped create weren’t around for the last 2008 financial crisis. Instead, based on the developments we’ve seen from our customers this year, I believe next year, the industry is poised to further embrace open banking for several reasons.

Firstly, open banking makes it easier for developers to build digital financial tools accessible to everyone. That ease of use and cost efficiency will continue to drive more digital financial companies to use open banking. At the same time, with 6 million active open banking users in the UK, people are more accustomed to managing their money online – and they expect to do so with the speed and simplicity that open banking provides. Those combining forces will push innovation to limits we haven’t imagined, and will ultimately provide the platform to solve real consumer challenges. 

A look back at 2022

2022 was momentous for Plaid in Europe and our customers throughout the region. Our team, spread across London, Amsterdam and Germany, works with hundreds of customers across the fintech ecosystem supporting companies of all sizes with our account onboarding and data insights solutions. Notably, we expanded our presence into Germany to support the flourishing fintech ecosystem with our account onboarding tools. We added our service coverage to now include 15 countries in Europe, most recently including Denmark, Estonia, Latvia, Lithuania, Norway, Portugal, and Sweden.

As the open banking company with the largest network of connected accounts globally, we’re experts in conversion. We’re constantly working to improve these to ensure onboarding is as smooth as possible, increasing conversion continuously.

As we expand deeper into continental Europe, we’re strengthening the bridges of digital finance between North America and Europe. That means our customers can reach millions more people with their digital financial tools. This year, customers personal financial management platform Quirk have found new opportunities to grow abroad.

Our customer base grew 60% this year–an excellent signal that more people are moving money into digital finance. We helped companies like Shares, a social retail investing platform, launch publicly, helping to make investing accessible for millions of people across the world with easy account onboarding and funding via Plaid.  

In addition, with the help of Plaid, customers like cryptocurrency exchange Kraken added open banking as an account funding method to users in different countries like the UK, making it easier to turn their fiat into crypto. 

Our platform benefits from experimentation across the widest variety of digital financial use cases, meaning we can offer insights and iteration for people across North America and the US to use open banking. Beyond our global reach, more than ever, customers are asking Plaid to solve a broader range of needs through our platform, network and partner ecosystem, including identity verification; onboarding and conversion; money movement; fraud prevention; and deeper insights to help build even better decisioning and connected experiences.

Where open banking is headed in 2023

Based on the trends we’ve seen take shape across customer developments and consumer behaviour, I believe we’ll see the industry move in a few key directions: 

• The open banking potential is finally unlocked - Tough economic times will result in severe shake ups in approaches to common financial processes. As a result, we’ll see the industry rethink the full lending lifecycle, from underwriting to repayment, and new approaches to helping people manage their money and build safety nets amid economic turmoil. Open banking has a role to play throughout nearly all financial services innovations in the next year. 

• Fintech fights back against fraud - As approaches to conducting fraud get more sophisticated and the financially vulnerable are more at risk, fintech companies will need to step up their approach to fighting fraud. They’ll seek more integrated approaches that weave together existing compliance/KYC processes, open banking, and more for better insights and prevention. 

• Companies look across borders for growth opportunities -As markets continue to tighten, we’ll see more creative companies look to translate their products and services to reach new customers. 

• Regulatory evolution - Regulators in the UK and Europe will get serious about a transition to Open Finance. I believe we’ll see the UK issue a formal path to Open Finance, and in the EU we’ll see open banking implementation prioritised as a first step toward Open Finance. Recently, we’ve already seen movement from the EU with Instant Payments legislation, as it significantly speeds up the path to wide adoption of account-to-account payments, as one of the biggest use cases of Open Banking.
  

How Plaid can help usher in the power of open banking

Next year, the power of open banking will be even more critical in its ability to deliver insights from data and account-to-account payments. As a result, digital financial companies need integrated solutions that address the needs of consumers, developers and banks will continue to flourish. We’re focused on offering a platform of connected solutions for more than 7,000 leading companies, no matter where they’re located, to build great fintech experiences across banking, payments, lending, investing, financial planning and more.

In our early days as a company and in Europe, our work was about getting more people to use digital finance. We’ve made immense progress since then, and now we’re out to make it as simple as possible for people to manage their money, assuage their fears, and, ultimately, unlock financial freedom.

If you’re looking for a partner in open finance, not just an open banking provider, reach out to our team – we’d love to help.