Abstract
This dissertation investigates the extent to which small and medium-sized enterprises (SMEs) in the United Kingdom are adopting open banking tools and identifies the principal barriers constraining meaningful uptake. Employing a systematic literature synthesis methodology, this study analyses peer-reviewed research, policy documents, and regulatory frameworks to examine both the supply-side availability and demand-side utilisation of open banking services among SMEs. The findings reveal that while open banking infrastructure has successfully enabled new SME lending relationships with fintech providers and demonstrably improved financing efficiency through faster approvals and reduced default rates, overall adoption remains uneven and concentrated within specific niches, particularly alternative credit provision. The research identifies five critical barriers impeding broader uptake: limited awareness and understanding of available services; perceived and actual data security risks; weak value propositions that fail to articulate compelling benefits; insufficient trust in third-party providers combined with limited social influence; and the persistent structural power of incumbent banks in maintaining customer relationship dominance. The dissertation concludes that addressing these multifaceted barriers requires coordinated interventions spanning regulatory enhancement, industry education initiatives, and deliberate value proposition development by service providers.
Introduction
The introduction of open banking in the United Kingdom represented a fundamental regulatory intervention designed to democratise financial data, stimulate competition, and ultimately deliver superior outcomes for consumers and businesses alike. Mandated through the Competition and Markets Authority’s Retail Banking Market Investigation Order 2017 and implemented in compliance with the European Union’s revised Payment Services Directive (PSD2), open banking requires the nine largest UK banks to share customer account data with authorised third-party providers through standardised application programming interfaces (APIs). This regulatory architecture was intended to dismantle traditional informational asymmetries that historically favoured incumbent financial institutions, thereby enabling innovative fintech companies and alternative lenders to compete more effectively for customer relationships.
For SMEs, which constitute over 99 per cent of UK private sector businesses and employ approximately 16.4 million people (Department for Business, Energy and Industrial Strategy, 2023), the promise of open banking held particular significance. These enterprises have historically faced considerable challenges in accessing appropriate financial services, with the withdrawal of relationship banking models, the consolidation of branch networks, and the aftermath of the 2008 financial crisis combining to create persistent funding gaps. Open banking theoretically offered SMEs enhanced access to credit through alternative lending channels, improved cash flow management through account aggregation services, and more competitive pricing through transparent comparison platforms.
Seven years following initial implementation, however, the question of whether this regulatory promise has translated into meaningful commercial reality for UK SMEs demands rigorous scholarly examination. While industry statistics suggest millions of active open banking users, disaggregating genuine SME adoption from broader consumer uptake, and distinguishing substantive operational integration from superficial engagement, requires careful analytical attention. Understanding the actual patterns of SME adoption, and the barriers preventing more comprehensive uptake, carries significant implications for policymakers, financial service providers, and the SME community itself.
This dissertation addresses this knowledge gap by synthesising contemporary research evidence to establish the current state of SME open banking adoption and to identify, categorise, and analyse the barriers constraining meaningful uptake. The study contributes to academic understanding by providing a comprehensive, evidence-based assessment that moves beyond promotional industry narratives to examine the structural, behavioural, and institutional factors shaping adoption outcomes.
Aim and objectives
Aim
The primary aim of this dissertation is to critically examine the extent of open banking tool adoption among UK SMEs and to identify the principal factors constraining meaningful uptake despite the availability of supporting infrastructure and regulatory frameworks.
Objectives
To achieve this aim, the dissertation pursues the following specific objectives:
1. To establish the current state of open banking adoption among UK SMEs, distinguishing between niche applications and broader operational integration.
2. To identify and categorise the demand-side barriers preventing SMEs from engaging with open banking services, including awareness deficits, risk perceptions, value proposition weaknesses, and trust-related factors.
3. To examine supply-side and structural barriers to adoption, particularly the role of incumbent bank power and channel dominance in limiting disruptive uptake of third-party tools.
4. To evaluate the effectiveness of existing policy interventions, including the UK bank referral scheme, in facilitating SME access to open banking-enabled services.
5. To synthesise findings into actionable recommendations for policymakers, financial service providers, and future researchers seeking to enhance meaningful SME adoption of open banking tools.
Methodology
This dissertation employs a systematic literature synthesis methodology to investigate SME adoption of open banking tools in the United Kingdom. Literature synthesis represents an established approach for consolidating existing research evidence, identifying patterns across multiple studies, and developing comprehensive understanding of complex phenomena where primary empirical research across the entire domain would prove impractical (Tranfield, Denyer and Smart, 2003).
The synthesis draws upon peer-reviewed academic literature, regulatory documentation, government reports, and policy analysis published between 2017 and 2025, corresponding to the period following open banking implementation in the United Kingdom. Source selection prioritised empirical studies examining open banking adoption patterns, theoretical analyses of adoption barriers, policy evaluations of relevant regulatory interventions, and cross-country comparative research providing contextual benchmarks.
Academic databases including Web of Science, Scopus, and Google Scholar were searched using combinations of relevant terms including “open banking,” “SME,” “small business,” “adoption,” “barriers,” “fintech,” “PSD2,” and “United Kingdom.” Government sources including HM Treasury, the Financial Conduct Authority, the Competition and Markets Authority, and the Open Banking Implementation Entity were consulted for regulatory and policy documentation. Inclusion criteria required sources to address open banking or closely related fintech adoption phenomena, with particular attention to studies examining SME or business user populations where available.
The analytical approach involved thematic categorisation of barriers identified across the literature, cross-referencing of findings between studies to establish consensus positions, and critical evaluation of methodological approaches and evidential strength. Where studies employed different methodological traditions—including econometric analysis, survey research, qualitative case studies, and policy analysis—triangulation was applied to identify convergent findings that could be stated with greater confidence.
This methodology acknowledges certain limitations. The synthesis necessarily relies upon the quality and scope of existing research, which varies in methodological rigour and geographic specificity. Some studies examine consumer rather than business adoption, requiring careful extrapolation. Additionally, the rapidly evolving nature of the open banking ecosystem means that recent developments may not yet be captured in peer-reviewed literature subject to publication delays.
Literature review
The regulatory foundations of UK open banking
The UK open banking framework emerged from the Competition and Markets Authority’s investigation into the retail banking market, which concluded that older and larger banks did not have to compete sufficiently for customers’ business and that this lack of competition was harming both personal and business customers (Competition and Markets Authority, 2016). The resulting Open Banking Remedies required the nine largest current account providers to adopt and maintain a common API standard, enabling authorised third parties to access account information and initiate payments with customer consent.
This regulatory intervention aligned with broader European developments under PSD2, which established the legal framework for account information service providers (AISPs) and payment initiation service providers (PISPs) across the European Union (Brown, 2022). However, the UK implementation through the Open Banking Implementation Entity (OBIE) went further than minimum European requirements, establishing technical standards and governance structures intended to facilitate genuine market transformation rather than mere compliance.
Clarke and Macartney (2025) characterise open banking reform as representing the “quiet politics” of financial services regulation, wherein technical implementation decisions made by industry actors substantially shaped outcomes in ways that received limited public or political scrutiny. Their analysis suggests that despite the transformative potential of the regulatory framework, incumbent banks retained considerable influence over implementation processes, potentially limiting the disruptive impact that policymakers originally envisioned.
Evidence of SME adoption: lending and financing applications
The most substantial evidence of SME open banking adoption concerns alternative lending and financing applications. Babina et al. (2024) provide early empirical evidence that UK open banking has enabled new SME lending relationships with fintech providers. Their analysis demonstrates that customer data access facilitated by open banking APIs has supported fintech entry into lending markets previously dominated by traditional banks, suggesting genuine commercial uptake on the credit provision side.
Complementary evidence from cross-country econometric research by Huang (2025) indicates that UK open banking policies have significantly improved SME financing efficiency, with measurable benefits including faster approval times and lower default rates. These findings imply that at least some segment of SMEs and their financing partners are actively utilising open banking infrastructure for operational purposes, generating tangible improvements in lending outcomes.
The UK bank referral scheme provides additional evidence of partial adoption. Under this scheme, banks that decline SME lending applications are required to offer referral to designated finance platforms, which can then connect businesses with alternative providers. Schammo (2019) analyses this intervention and finds that while the scheme represents an innovative attempt to address information asymmetries in SME finance markets, its practical impact has been limited by the fact that only a subset of rejected SMEs actually engage with the referral platforms and alternative lenders. This finding suggests that even when data-sharing channels exist and are explicitly offered, SME uptake remains constrained by other factors.
The gap between availability and adoption
Despite these specific success stories in lending applications, multiple studies across Europe find that overall customer adoption of open banking services remains considerably slower than infrastructure availability would suggest. Chan et al. (2022) examine consumer fintech adoption including open banking services and identify substantial gaps between theoretical availability and practical utilisation. De Araluze and Plaza (2023) similarly document slow adoption patterns, while De Araluze (2022) specifically asks why open banking models in Europe are underperforming relative to regulatory expectations.
Heins and Rigopoulos (2024) provide empirical exploration of key factors and barriers affecting consumer adoption of open banking applications, finding that users frequently fail to progress beyond basic account-viewing functionality to more sophisticated applications. This pattern of shallow engagement, where users may technically have adopted open banking but utilise only a fraction of available capabilities, appears relevant to understanding SME experiences as well.
Demand-side barriers: awareness and understanding
Low awareness and understanding of open banking services constitute a fundamental barrier to adoption. Schammo (2019) notes that many SMEs are simply not aware of finance options beyond traditional bank products, limiting their capacity to seek out or respond to open banking-enabled alternatives. This awareness deficit extends beyond mere knowledge of service existence to encompass understanding of what open banking can actually do, how it operates, and what benefits it might deliver.
Heins and Rigopoulos (2024) reinforce this finding, indicating that insufficient understanding of open banking functionality prevents potential users from forming accurate expectations about service value. De Araluze (2022) similarly identifies awareness gaps as a primary factor in explaining European underperformance relative to regulatory ambitions. For SMEs, whose owner-managers typically focus limited attention on financial administration, this awareness barrier may prove particularly acute.
Demand-side barriers: perceived and actual risk
Perceived and actual risks associated with data sharing represent another major barrier to SME adoption of open banking tools. Chan et al. (2022) identify perceived data and privacy risks as strongly dampening intention to use open banking services, with security concerns featuring prominently in user hesitation. De Araluze and Plaza (2023) confirm that risk perception operates as a primary barrier, while Heins and Rigopoulos (2024) document similar patterns in their empirical investigation.
These findings align with broader research on SME technology adoption. Rana et al. (2019), examining barriers to mobile commerce adoption among UK SMEs, identify risk perception as a critical factor in adoption decisions, with concerns about data security, fraud, and operational disruption featuring prominently in SME decision-making. The transferability of these findings to open banking contexts appears high, given the similar requirement to share sensitive financial data with third-party providers.
The risk barrier encompasses both objective concerns—data breaches do occur, and third-party providers vary in security practices—and subjective perceptions that may exceed actual risk levels. Addressing this barrier therefore requires both genuine security improvements and effective communication to calibrate risk perceptions appropriately.
Demand-side barriers: weak value propositions
Even among SMEs who are aware of open banking and willing to accept associated risks, weak value propositions limit adoption. Heins and Rigopoulos (2024) find that users frequently perceive limited benefits beyond basic account aggregation and viewing functionality, failing to identify compelling use cases that would justify the effort and perceived risk of adopting new services.
De Araluze (2022) argues that the open banking value proposition has not been adequately articulated to potential users. Generic promises of “better financial management” or “easier access to credit” may prove insufficiently specific or compelling to motivate behavioural change, particularly for SMEs with established banking relationships that, while imperfect, meet basic operational needs.
This value proposition weakness may partly reflect the nascent state of open banking service development. Many third-party providers have prioritised aggregation and basic account information services over more sophisticated applications that might deliver clearer value to business users. The absence of tailored SME-specific use cases—such as automated supplier payment optimisation, integrated invoice financing, or predictive cash flow analytics—limits the extent to which open banking can demonstrate compelling value beyond marginal improvements to existing practices.
Demand-side barriers: trust and social influence
Trust in service providers and social influence from peers and networks emerge as additional demand-side barriers to SME open banking adoption. Chan et al. (2022) identify initial trust as decisive for adoption decisions, with users requiring confidence in provider reliability, competence, and benevolence before sharing financial data. De Araluze and Plaza (2023) specifically examine the relevance of initial trust and social influence in intention to use open banking-based services, confirming that both factors significantly predict adoption intentions.
De Araluze (2022) elaborates on the trust dimension, noting that many potential users lack established relationships with third-party providers and have limited basis for evaluating provider trustworthiness. Unlike traditional banks, which benefit from physical presence, long operational histories, and regulatory oversight visibility, fintech providers offering open banking services may appear novel and uncertain. For risk-averse SME owner-managers, this trust deficit may prove determinative.
Social influence operates through network effects and peer observation. Where SMEs observe trusted peers successfully using open banking services, adoption intentions increase; conversely, where peers are not using these tools, the absence of social proof reinforces hesitation. This dynamic creates potential for adoption cascades once critical mass is achieved, but also explains persistent non-adoption where early adopters remain scarce.
Supply-side barriers: incumbent bank power and channel dominance
Beyond demand-side factors, structural and supply-side barriers also constrain SME open banking adoption. Brown (2022) analyses the UK’s Midata and open banking programmes and identifies incumbent banks’ capacity to shape implementation in ways that protect existing market positions. Despite regulatory requirements for API provision and data sharing, banks retain considerable discretion over user experience design, authentication processes, and service promotion that can facilitate or impede customer engagement with third-party providers.
Clarke and Macartney (2025) develop this analysis further, examining the “quiet politics” through which incumbent banks have influenced open banking reform outcomes. Their research suggests that large banks’ ability to dominate customer relationships, combined with implementation approaches that minimise disruption to existing business models, has limited the transformative potential of open banking for SME users.
Schammo (2019) provides specific evidence of channel dominance effects in the SME lending context. The bank referral scheme, while requiring banks to offer alternatives to rejected applicants, does not require banks to actively promote these alternatives or to design referral processes that maximise uptake. The finding that only a subset of eligible SMEs engage with referral platforms suggests that incumbent banks’ control over the customer journey substantially shapes outcomes.
This structural barrier interacts with demand-side factors. SMEs relying heavily on their main bank relationship may be less likely to become aware of open banking alternatives, less likely to perceive value in disrupting established arrangements, and less likely to invest trust in unfamiliar providers. The cumulative effect reinforces existing market structures even where regulatory interventions seek transformation.
Discussion
The pattern of uneven adoption
The evidence synthesised in this dissertation reveals a consistent pattern: UK SME adoption of open banking tools is real but uneven, concentrated in specific use cases rather than representing broad operational integration. Alternative lending applications demonstrate the clearest adoption, with open banking data sharing enabling fintech entry into SME credit markets and measurably improving financing efficiency. However, this success in one domain has not translated into equivalent adoption across the full range of potentially valuable open banking applications.
This pattern reflects rational SME behaviour given existing barrier structures. Where open banking demonstrably solves an immediate, pressing problem—such as obtaining credit following rejection by a traditional bank—SMEs have shown willingness to engage with new services. Where value propositions are less immediate or less clearly articulated, the effort and risk required for adoption outweigh perceived benefits, and existing banking arrangements persist by default.
The concentration of adoption in credit applications also reflects supply-side dynamics. Alternative lenders have strong commercial incentives to utilise open banking infrastructure, as it reduces their customer acquisition costs and enables credit decisions that would otherwise be impossible without access to transaction data. Other potential open banking applications—account aggregation, payment initiation, financial planning—may lack equally powerful supply-side drivers, limiting the development and promotion of compelling SME-focused offerings.
The interaction of multiple barriers
The barriers identified in this dissertation do not operate in isolation but interact in ways that compound their individual effects. Low awareness limits the pool of SMEs who might consider open banking adoption; among those with some awareness, risk perceptions deter many from proceeding; those willing to accept risk may struggle to identify compelling value propositions; and even those who perceive value may lack sufficient trust in available providers or social influence from peers to complete adoption. At each stage, potential adopters are filtered out, resulting in the modest overall uptake observed despite substantial infrastructure availability.
Incumbent bank power operates as both a direct barrier—through control over customer journeys and service design—and as a contextual factor that reinforces other barriers. Banks have limited incentive to raise SME awareness of open banking alternatives, to actively address risk perceptions, to develop competing value propositions, or to build trust in third-party providers. Indeed, their commercial interests may favour the opposite approach, maintaining customer relationships and cross-selling traditional products rather than facilitating data portability and competitive switching.
This barrier interaction has implications for intervention design. Addressing any single barrier in isolation may prove insufficient if other barriers remain operative. Effective strategies likely require coordinated action across multiple barrier categories, potentially involving regulatory enhancement, industry education initiatives, security standardisation, value proposition development, and structural measures to reduce incumbent advantages.
Policy implications
The findings of this dissertation carry significant implications for policymakers seeking to realise the original vision of open banking as a catalyst for competition and innovation in SME financial services. The partial success in alternative lending demonstrates that regulatory intervention can enable new market entry and improve outcomes, but the limitations of broader adoption suggest that additional measures may be required.
First, awareness-raising initiatives specifically targeted at SMEs could address fundamental knowledge gaps. While consumer-focused open banking promotion has received attention, SME-specific communication emphasising business-relevant use cases has been comparatively limited. Trade associations, business support organisations, and the successor to the OBIE could play roles in developing and disseminating appropriate messaging.
Second, regulatory attention to security standards and trust certification could address risk perceptions. While the FCA’s authorisation process provides baseline assurance, more visible trust marks, simplified security communications, and potentially mandatory incident disclosure could help SMEs evaluate provider reliability and calibrate risk perceptions appropriately.
Third, initiatives to stimulate value proposition development could address the current weakness in SME-focused open banking offerings. This might include innovation challenges, sandbox environments, or direct funding for development of high-value SME applications that move beyond basic aggregation functionality.
Fourth, and perhaps most challengingly, measures to address incumbent bank power may require regulatory attention. The transition from open banking to “smart data” initiatives and the potential for expanded data-sharing requirements in other sectors could provide opportunities to revisit implementation frameworks and ensure that incumbent influence does not continue to constrain outcomes.
Limitations and future research directions
This dissertation has employed literature synthesis methodology, which carries inherent limitations. The analysis depends upon the quality and comprehensiveness of existing research, which, while growing, remains incomplete. Empirical studies specifically examining UK SME open banking adoption are relatively few, requiring careful extrapolation from related consumer studies and cross-country comparisons. The rapidly evolving nature of the open banking ecosystem also means that recent developments may not yet be reflected in peer-reviewed literature.
Future research could address these limitations through primary empirical investigation of SME open banking experiences. Survey research with representative SME samples could quantify awareness levels, adoption rates, and barrier perceptions with greater precision than the current synthesis permits. Qualitative case study research could illuminate the decision-making processes through which SME owner-managers evaluate and respond to open banking opportunities. Longitudinal research could track how adoption patterns evolve as the ecosystem matures and as interventions address identified barriers.
Comparative research across jurisdictions implementing different open banking models could also prove valuable. Australia, Brazil, and various Asian markets are pursuing open data initiatives with varying design features, and systematic comparison of SME outcomes across these contexts could inform UK policy development.
Conclusions
This dissertation set out to examine the extent of open banking tool adoption among UK SMEs and to identify the principal factors constraining meaningful uptake. Through systematic synthesis of contemporary research evidence, it has addressed each of its stated objectives.
Regarding the current state of adoption, the evidence demonstrates that UK SMEs are using open banking-enabled services in specific niches, particularly alternative lending, where these tools can materially improve financing efficiency through faster approvals, expanded access, and reduced default rates. However, broad, day-to-day adoption across the full range of potential applications remains limited, with overall uptake far from universal despite substantial infrastructure availability.
Regarding demand-side barriers, the dissertation has identified and analysed four interconnected factors constraining SME adoption: limited awareness and understanding of what open banking can offer; perceived and actual risks associated with data sharing; weak value propositions that fail to articulate compelling benefits beyond basic account viewing; and insufficient trust in third-party providers combined with limited social influence from peers.
Regarding supply-side and structural barriers, the dissertation has examined the continuing power of incumbent banks to shape customer relationships and implementation outcomes, finding that this structural factor both directly constrains third-party tool adoption and reinforces demand-side barriers.
Regarding policy interventions, the analysis of the UK bank referral scheme demonstrates that even where data-sharing channels exist and are explicitly offered, only a subset of SMEs engage, suggesting that infrastructure provision alone is insufficient to drive adoption without corresponding attention to demand-side barriers.
These findings carry significance for multiple stakeholder groups. For policymakers, they indicate that realising the full potential of open banking for SMEs requires coordinated intervention across awareness, risk, value, trust, and structural dimensions. For financial service providers, they highlight opportunities to develop more compelling SME-focused offerings and to build trust through transparency and security excellence. For the research community, they identify gaps in current understanding that warrant further empirical investigation.
The overall conclusion of this dissertation is that meaningful SME uptake of open banking tools is constrained more by awareness, trust, value perception, and incumbent power than by raw availability of tools. The infrastructure exists; the barriers to its utilisation are predominantly human, institutional, and structural rather than technical. Addressing these barriers represents both a challenge and an opportunity for all stakeholders committed to improving financial services outcomes for the UK’s SME community.
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