Is Open Banking a White Elephant? Rethinking Its Role in the UK’s Financial Future

When the UK Fintech Academic Network convened in May 2025, a provocative question echoed across its panels and breakouts: has open banking become a white elephant? Eight months later, that critique still surfaces in boardrooms and fintech forums, but it increasingly collides with evidence that open banking has moved from “initiative” to embedded infrastructure. A project once heralded as a revolution in consumer finance is now being judged for its limited visibility and uneven commercial outcomes. Is this verdict fair, or does it reflect a deeper misalignment between what open banking was built to do and what we expected it to deliver?

From Blueprint to Backdrop: What Is Open Banking & Where Did It Come From?

Open banking refers to a regulatory and technological framework that enables consumers and businesses to securely share their financial data held by banks and other financial institutions with authorised third parties. With the customer’s consent, this data can be accessed via application programming interfaces (APIs), allowing fintechs, account aggregators, and other service providers to offer personalised products such as budgeting apps, smart lending tools, or streamlined payments.

The concept emerged from a broader push for data portability and consumer empowerment. In the UK, it was formally introduced following the Competition and Markets Authority’s (CMA) 2016 Retail Banking Market Investigation. The CMA concluded that a lack of competition among the UK’s largest banks had left customers facing poor service, limited innovation, and uncompetitive pricing. One of its core remedies was open banking, intended to force greater transparency and break the stranglehold of the so-called 'Big Four' banks.

The regulatory foundation for open banking was reinforced at European level by the second Payment Services Directive (PSD2), which came into effect in January 2018. PSD2 mandated that banks across the European Economic Area (EEA) provide licensed third parties with access to account data and payment functionality, provided the customer gave explicit consent. The UK’s approach, spearheaded by the Open Banking Implementation Entity (OBIE) and now operating through Open Banking Limited (OBL) as the ecosystem transitions, was more ambitious in both scope and standardisation, positioning Britain as a global leader in financial infrastructure reform.

Is the Adoption Story Still Disappointing?

In 2025, low adoption was still regularly cited as evidence that open banking had stalled. As of early 2026, that argument is materially weaker. OBL’s reporting showed 13.3 million active users

as of March 2025, at which point around 1 in 5 eligible people and small businesses with online account access were considered “open banking active”.

By late 2025, the FCA was publicly citing more than 16 million UK users benefiting from open banking. That is not marginal adoption; it is scale. The more accurate critique is that open banking’s growth has not translated into widespread consumer recognition. Many users interact with services powered by open banking without realising it, because the value is delivered 'behind the scenes' through accounting platforms, lending journeys, pay-by-bank checkout flows, and automated affordability assessments rather than a branded consumer proposition. 

This distinction matters. Adoption is no longer the core issue. Visibility, trust cues, and consistent user experience are.

Misalignment Between Infrastructure & Incentives

Even with strong adoption metrics, structural concerns persist around ecosystem maturity and incentives. Large banks still have limited commercial motivation to prioritise API performance beyond baseline compliance, and third-party providers continue to cite friction in uptime, data completeness, and service consistency. The result is an ecosystem in which the 'pipes' exist but the pressure is uneven: innovation thrives where integrations are stable and stalls where they are not.

Monetisation remains the second, deeper challenge. Many consumer-facing fintech propositions still struggle to translate open banking connectivity into sustainable unit economics. In contrast, enterprise and SME use cases (credit decisioning, reconciliation, cashflow forecasting, and embedded finance) have continued to perform better because the willingness to pay is clearer and the benefits are easier to quantify.

The Regulatory Landscape: Now a Delivery Question

Since May 2025, the regulatory conversation has shifted from “what next?” to “how do we deliver it?” The FCA’s work on the Future Entity, the intended successor body to develop standards and long-term ecosystem governance, has been progressing, reflecting recognition that open banking cannot remain a transitional programme indefinitely. 

The more immediate acceleration point has been Variable Recurring Payments (VRPs). By December 2025, regulators were citing VRPs as a key driver of momentum, with VRPs accounting for around 16% of open banking transactions, largely through sweeping use cases (moving money between accounts in the same name). This is important because it demonstrates that open banking is no longer just about data access; it is increasingly a payments rail. 

Crucially, the industry has been moving towards a commercial VRP model, with a new industry vehicle reported as preparing for first live payments in Q1 2026. If commercial VRPs scale beyond sweeping into bill payments, subscriptions, and regulated recurring commerce, they could become the clearest route yet from compliance infrastructure to mainstream payments utility.

Smart Data Has Moved from Ambition to Architecture

Since late 2025, Smart Data has crossed an important threshold. With the Data (Use and Access) Act 2025 now in force, the UK has given statutory backing to secure, consent-based data sharing beyond banking, extending the open banking model into sectors such as energy, telecoms and insurance.

This matters because it reframes open banking’s role. Rather than a self-contained reform whose success is measured by consumer visibility alone, open banking now looks like the UK’s first live implementation of a wider data portability framework. It may not be the end state, but it is the proof of concept. Seen through that lens, open banking is not a white elephant, but foundational infrastructure.

Government Services as a Testing Ground

Open banking’s most quietly effective use case remains public-sector payments. HMRC’s integration continues to demonstrate what open banking is good at when incentives are aligned: reducing fraud exposure, lowering cost-to-serve, and improving customer experience by avoiding manual card entry and payment friction. In a world of persistent authorised push payment fraud and rising scrutiny on payment journeys, these 'boring' implementations may be among the most strategically important, because they prove the model works at scale in high-volume, high-trust contexts.

Still Worth the Fight

Calling open banking a white elephant may remain emotionally resonant, particularly for those who expected a consumer revolution and got an infrastructure layer instead. But if we assess open banking as infrastructure, not theatre, it looks materially more successful. User numbers are high. Payments usage is rising. VRPs are maturing from niche to meaningful. Governance is moving towards a Future Entity. And Smart Data now has statutory scaffolding through the Data (Use and Access) Act 2025. 

The question for 2026 is therefore not “does open banking work?” It is “can the UK execute the next phase?”which means: enforce consistent API performance; deliver commercial VRPs at scale; reduce fragmentation in oversight; and create a trust and communications model that makes users feel safe, informed, and in control.

Conclusion: A Strategic Crossroads in 2026

As of January 2026, open banking sits at a strategic crossroads. The foundations are strong and adoption is no longer in doubt. The failure risk is not that the infrastructure is unused, but that delivery stalls at the moment it should be transitioning from compliance connectivity to mainstream utility.

Open banking is not a white elephant. It is the UK’s most mature “Smart Data” infrastructure, now moving into its payments era. The challenge ahead is not invention. It is execution and specifically, governance, incentives, performance, and scale.