Open Banking and Retail Customer Account Switching in the Knowledge Economy: Evidence from the United Kingdom

We investigate the success of open banking in enabling customers to switch bank accounts in the United Kingdom. Its roll-out was initially driven by a need to improve customer satisfaction levels in the traditional banking sector. Its adoption is an important aspect of the knowledge-based economy. The aim was to increase competition and provide more choice for retail customers. Its introduction allowed third parties access to bank account data using application programming interfaces. This made it easier for customers to switch accounts. To test whether this was successful in practice, we conduct an observational experiment using a difference in difference methodology on the adoption of the open banking protocols. We used the creation of the Open Banking Implementation Entity (OBIE) in February 2017 to mark the start of the policy intervention. We find a statistically significant increase in net account switching among banks mandated to adopt open banking protocols, conditional on these factors. We find that there is evidence to suggest a significant difference in account switching behaviour when “total assets”, “net promoter score” and “customer complaints” are used as control variables.