Open Finance can drive huge revenues for UK banks – but they need to act soon

The numbers suggest there’s an upturn in UK banking after more than a decade in the doldrums. Net interest margins stood just under 2.6% on average in H1 2025, a significant improvement on profitability over the previous decade. Dig a little deeper, though, and the situation looks less positive.

To start with, 47% of CFOs expect operating margins to decline over the next year according to the 3Q 2025 UK Deloitte CFO survey, with the same survey reporting stubbornly high customer acquisition costs (£561/customer) and a hike in operating expenses anticipated by 84% of UK bank CFOs. Underlying these concerns lurks a deeper threat – that of bank disintermediation in a changing landscape.

A surge in Open Banking and APMs: opportunity and threat

As Open Banking and alternative payments rise, it’s estimated 20% of UK bank profits could be at risk by 2030.

The UK is Europe’s leading Open Banking success story. As of January 2026, figures from UK Open Banking Limited (OBL) show that user connectivity grew 36% in the previous year, with the number of payments up 57% to 351 million transactions. Open Banking is now used by nearly one in three UK adults, or around 15.2 million people.

As Open Banking payments keep growing, and other so-called alternative payment methods (APMs) become more popular, Bain and Company estimate that 20% of banking profits could be at risk over the next five years.

On the upside, UK Finance is about to launch (Q1 26) its Wave 2 commercial model for Variable Recurring Payments (VRPs), building on the success of Open Banking to date. This will, at last, create API rails that can generate revenue through handling payments, and enable UK banks to tap into a global API banking market valued at $31.73 billion in 2024 –with growth of more than 25% annually out to 2030.

From Bank to Financial Marketplace

Forward-thinking banks will grasp the opportunity API Banking offers to turn themselves from a stand-alone provider of financial services into a platform through which customer can access both bank-branded services, and other options from selected partners, from payments (including Variable Recurring Payments (VRPs) and APMs), loans and insurance through to wealth management, subscription services and budgeting tools – all through a single platform powered via APIs controlled by the bank.

Poland’s Allegro embedded lending into its platform within six months, while Germany’s Raisin has created a pan-European savings marketplace that earned €158 million revenue in 2023.

New revenue streams created by the switch to a platform model include partner referral fees, revenue-sharing on embedded products, subscription bundles, and value-added data services. Adding these revenue streams would directly speak to what CFOs interviewed by Deloitte say is their number one priority – diversifying income into non-interest related areas.

What’s more, onboarding partners to a bank’s platform via API can be achieved rapidly, and at low cost and risk – all while taking advantage of the trust UK banks enjoy as fully-regulated entities.

Banks can create a marketplace layer which sits on top of existing core infrastructure, enabling multiple new revenue streams without long execution times, high risk and the huge cost of completely replacing core technologies.

Across Europe, banks such as Allegro (Poland) and Raisin (Germany) are already leading the way. Allegro created a lending business embedded into its banking platform within six months using existing API infrastructures which is already matching revenues generated by traditional bank lending models. Meanwhile, Raisin created a pan-European savings marketplace in a similar time-frame which generated €158 million revenue in 2023.

The time is ripe: take advantage

At time of writing, UK banks enjoy a window of strategic advantage over their European neighbours – but it won’t stay open for ever.

Alongside the VRP commercial model launching this quarter, the UK also boasts a mature partner ecosystem – and the advantage of the Smart Data Act, enacted in June 2025. With the EU’s third payment services directive (PSD3) not set for implemention until 2027/28, UK banks have the advantage of regulatory clarity over European peers. However, the UK government has indicated it will revise legislation to ensure alignment with PSD3 post 2027 – meaning this advantage won’t last forever.

Banks that act now have the opportunity to become orchestrators of their customers’ daily financial lives: by contrast, delays could mean ending up as balance-sheet utilities inside a different ecosystem.

Winning banks in the 2030s won’t always have the most modern core systems – but they will grasp how to profit from open finance, creating curated, revenue-generating marketplaces.

This is how we fix it:

API Banking: Empowering Marketplaces

Payments as a Service (PaaS)

E-commerce gateway