Instant Money Sounds Great. Who Pays for It?

gcwagner.com | November 2026 | G.C. Wagner

TL;DR: Open finance promises instant switching, real-time cash and programmable money. Customers who pay attention could gain a lot. But banks have long built their funding on customers who don't move, and markets have long run on small delays. Take those away and the profit has to come from somewhere else. My view: use the data side, be careful with the funding side.

When I was building RCI Bank in the UK, our job was to raise retail deposits to fund car finance. Retail deposits are cheaper and stickier than most people think, unless there's a crisis.

Then a platform approached us. It offered to bring us deposits, and its selling point was that customers could move their money instantly. We turned it down at first. My worry was simple. If your funding relies on customers who switch in one click, you lose the stickiness. As soon as someone pays a better rate, the money goes.

Open finance now makes that same pitch for the whole of financial life. Mortgages, pensions, savings, all switchable by API. So is it worth it for companies?

What the research says about sticky money

A new paper from Harvard, Chicago and Georgia State economists uses data on 58 million US deposit accounts. Only 5 to 15% of depositors open a new account each year. Only about 15% of closures are people shopping for better terms. The authors estimate that about 93% of depositors are inactive at any time.

That sleepiness is worth a lot. It makes up about 57% of the average bank's deposit franchise value. Without it, bank profit margins on deposits would be about half as big, falling from 68 to 32 basis points. The authors also say that fintech services which automate deposit shopping could erode this value. That is the platform I was offered.

The Financial Stability Board says the same thing in plainer words. Deposit platforms make it easier and cheaper to rate-shop, and deposits gathered this way could be less stable and more sensitive to confidence. It cites one study finding that banks with digital deposit platforms have a deposit franchise value about 40% lower. Their sensitivity to rate changes more than doubles. The FSB also says the evidence is thin and volumes are still limited, so I'd call this a warning, not a proven fact.

The Bank of England's liquidity rules point the same way. When the PRA looks at how fast retail deposits might leave, it considers the channel through which the deposits were taken.

One caveat. The big study is US data. UK savers are not all asleep. In the year to June 2024, the FCA found savers moved £29 billion into higher-paying fixed-term and notice accounts. It also found the largest firms still paid below the market average on standard easy access accounts.

What the FCA is really testing

The FCA published its open finance roadmap on 14 April 2026. Its two immediate priorities are SME lending and mortgages. Pensions sit in a longer list of areas it hopes to cover one day, with insurance, savings and account switching.

Testing so far:

TechSprints, November 2025 to February 2026. Firms tried products using synthetic data, including AI mortgage affordability tools and reusable loan-application data packs.
Mortgage policy sprint, 8 and 9 June 2026. About 80 people from banks, fintechs, credit agencies and consumer groups. The outcomes report came out on 3 September.

The sprint's headline finding surprised me. Getting more data isn't the main challenge. The challenge is whether lenders can trust it as evidence. Participants talked about "capture once, verify once, reuse safely". They worried that voluntary participation wouldn't be enough and suggested making it mandatory. They also asked who pays for it, and who is responsible when shared data is wrong.

Notice what's missing. Nobody was testing "instant mortgage switching". The use cases are fewer documents, better affordability checks and tools to plan overpayments. That is a long way from your money moving to the best rate every night.

Pensions have their own track. The pensions dashboards had a final connection deadline of 31 October 2026, and about 85% of records were connected by July. But the public dashboard isn't expected until 2027/28, and it is for viewing, not switching.

On the payments side, things are further along. Open banking has about 17 million users, nearly one in three UK adults. Commercial variable recurring payments went live on 2 June 2026.

Instant money needs a buffer

Now stablecoins and programmable cash. The Bank of England's final rules, published on 22 June 2026, show what instant really costs.

The Bank still worries that fast, large moves from bank deposits into stablecoins could cut lending. The UK relies on banks for credit more than most countries. It dropped its planned per-person holding limits, which were £20,000 for individuals and £10 million for businesses. In their place, it set a temporary cap of £40 billion on each systemic stablecoin.

It also says issuers must keep 30% of their backing assets in deposits at the Bank that pay no interest. The reason is that runs can be quick. Stablecoins can be programmed to withdraw automatically, runs are visible in real time, and social media speeds them up. A gilt can't be sold for same-day cash either, because of the T+1 settlement cycle.

So the central bank is saying that instant redemption needs a pile of idle, zero-return money sitting there just in case. Remember Silicon Valley Bank. Depositors took out $42 billion in one day, about a quarter of its deposits. The FSB found that the median recent bank run lost 7% of deposits a day. Past runs lost 1%.

Who gains from the gap in settlement?

UK equities settle on T+2 today. They move to T+1 on 11 October 2027. The US made the switch on 28 May 2024. The FCA says T+1 should reduce risk and free up funds for investment. In North America, firms that automated more saw better settlement and a smaller rise in costs. They also needed less money for clearing.

Two places where timing really pays:

Interest on client cash. The FCA surveyed 42 investment platforms and SIPP operators. Most kept some of the interest earned on customers' cash. Many also charged fees on the same cash. It told them to stop the double charge and justify what they kept.
Share lending. Under T+1, lenders have less time to recall loaned shares. The timing matters to the people who profit from lending.

The pattern is clear though. Regulators have been narrowing these gaps one at a time, so any profit that lives in a gap is shrinking.

Can everybody be fast? My view

1. Instant for everyone makes the margin disappear. Part of the deposit profit today comes from slow customers. If everyone optimises, deposit margins fall to the competitive level. That's good for savers. It's why regulators push for it. But it also makes banks riskier, and the paper estimates the default probability of large US banks would be about 10 points higher in normal times.

2. Someone has to hold the buffer. Instant redemption only works if somebody keeps liquid reserves, and reserves earn little. If every treasurer sweeps every pound to the best yield every hour, the buffer goes, or its cost gets passed on.

3. The gains go to the fast. Customers with data, attention and good tools gain. Sleepy customers fall behind. Older people's accounts turn over less, for example. It's the same logic as arbitrage. It pays only while others aren't doing it.

There's one more twist. People wake up when rates are high. A one-point rise in short rates cut inactivity by 1.2 points in that paper. So the effect is strongest when rates are high, and that's today.

So should companies engage?

Pick your side.

Data side: yes, test it. Mortgages, SME lending and affordability are where open finance has a real use case. Run pilots. Don't bet the business until the FCA sorts out liability and trust.
Funding side: be careful. Treat rate-chasing deposits like short-term wholesale funding. Stress them for fast outflows. Use them at the margin and keep a core of relationship money.
Treasury: take the visibility, keep the buffer. Real-time cash views are useful. Sweeping everything to the top rate isn't free.
Stablecoins: watch, don't build. The Bank's code is still in draft, and the cap is only temporary.
If your profit lives in a gap: plan for it to shrink. T+1, retained-interest rules and savings pass-through are all heading one way.

Instant is great for customers who pay attention. It's a threat to firms that earn from the ones who don't. Both can't be true for everyone at once. The smart move is to know which side your profit sits on.