Lessons learned from Open Banking in the UK & Europe – Insights for the US

At ProofID, we’ve had front-row seats to the successes and challenges of open banking through partnerships such as our work with Tesco Bank, where we delivered seamless, secure customer identity solutions. With these insights, here are key lessons US financial institutions can apply to build a thriving open banking ecosystem.

The UK’s success in open banking was largely due to its focus on standardisation. The Open Banking Implementation Entity (OBIE) provided a uniform technical standard, which simplified and accelerated integration for third-party providers. Meanwhile, the EU’s PSD2 regulation allowed for diverse standards, leading to slower and more fragmented adoption across its member states.

For the US, the PFDR empowers standard-setting organizations to provide a regulatory framework. However, piecemeal efforts could result in barriers to entry, slowing the ecosystem’s growth. A unified, interoperable standard will not only enable faster implementation but also bring clarity to developers and financial institutions alike. Drawing from the UK’s example, a standardised approach will be critical to rapid market adoption.

• Due to its unified standards, 7 million UK consumers were using open banking-powered financial apps as of 2022.
• On the other hand, the EU’s fragmented approach left less than 30% of European banks PSD2-compliant by 2023, impacting adoption rates.

Technical frameworks and regulations alone cannot guarantee success. User experience plays a pivotal role in building trust and fostering adoption. Early efforts in the UK and Europe often prioritized backend infrastructure, leaving customer-facing designs lacking in usability and polish.

One standout example of getting it right is Tesco Bank. ProofID partnered with the institution to implement a unified customer identity solution that consolidated siloed security frameworks and introduced seamless, self-service features. The results were significant, Tesco Bank was able to strengthen PSD2 compliance, enhance customer experience, and enable real-time management of accounts across web and mobile platforms.

For US financial institutions, the lesson is clear—customer-centric solutions are not optional. Seamless consent management, intuitive account aggregation tools, and smooth app-to-app experiences will define open banking’s success in the US.

Consumer trust is a key pillar of open banking, but a 2023 Pew Research Center study revealed that 81% of American adults are worried about how companies handle their personal data, underscoring the urgent need for transparency and robust security. Financial institutions must address these concerns by implementing secure frameworks such as end-to-end encryption and risk-based authentication while providing clear, accessible information about their data practices. Empowering consumers with intuitive tools to monitor and manage data permissions—such as consent management dashboards—enhances control and fosters trust.

Open banking also offers a chance to redefine these relationships by prioritising transparency and security, ensuring consumers feel confident in sharing their financial information. By committing to these principles, financial institutions can transform skepticism into trust, forging stronger, more loyal customer relationships in the evolving digital financial landscape.

Open banking systems are not static. UK frameworks have continuously evolved since their inception, now transitioning into broader applications under the umbrella of Open Finance. This expansion includes additional industries like insurance, investments, and pensions, demonstrating the scalability of open ecosystems.

The US must similarly adopt scalable, future-proof infrastructure as part of a forward-looking strategy. Under the PFDR, financial institutions should prioritize systems that allow for continuous iteration and enhancement based on consumer feedback and technological advancements. The UK’s success in leveraging these updates highlights how adaptability can position financial entities at the forefront of innovation.

• The global open banking market is projected to surpass $43 billion by 2026, driven by demand for value-added services like personalized insights, suggesting vast potential for early adopters.

Beyond regulatory compliance, open banking presents an untapped opportunity for product innovation. UK banks that embraced open banking principles offered new tools like spending insights, automated savings, and payment deferral features to stand out in the competitive market.

Tesco Bank provides an excellent example of harnessing open banking for innovation. With ProofID’s expertise, they implemented continuous, risk-based authentication technology, enabling quick deployment of features like payment deferral programs during the COVID-19 pandemic. Such initiatives reinforce how open banking can position institutions as forward-thinking leaders.

• A 2023 BCG study noted that financial institutions leveraging open banking data to provide personalized investment tools saw a 10-15% uplift in customer satisfaction and retention, showcasing the tangible benefits of such initiatives.

A major success factor in open banking is maintaining consumer trust through robust security. Any misstep in securing sensitive financial data could undermine years of ecosystem building. The PFDR sets clear mandates on data protection, but it’s up to financial players to adopt proven, scalable frameworks.

Tesco Bank, in collaboration with ProofID, achieved this by implementing Ping Identity solutions like PingAccess and PingFederate, securing millions of daily customer transactions while enabling rapid service rollouts. US institutions can replicate this kind of success by partnering with IAM experts who provide ready-made solutions, reducing both complexity and deployment timelines.

• A Guardian Analytics 2023 survey revealed that 72% of consumers would leave their current financial institution if they suspected poor data security, underscoring the importance of resilient frameworks.