Fintechs get more certainty about open banking’s future direction

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Fintechs have welcomed the UK open banking regulators recommendations for the future of the sector

Karl Flinders


Published: 18 Apr 2023 14:45

The UK fintech industry has welcomed the open banking regulator’s recommendations for the next phase of open banking. The Joint Regulatory Oversight Committee (JROC) has said its recommendations will ensure that open banking develops in a “safe, scalable and economically sustainable way”.

To this end, the JROC – which has replaced the Open Banking Implementation Entity (OBIE) – set out five key steps. It hopes to level up availability and performance, mitigate the risks of financial crime, and ensure effective consumer protection if something goes wrong. It also recommended improving information flows to third-party providers and end users, and promoting additional services with variable recurring payments (VRPs) to be used as a pilot. VRPs not only allow people to vary payment amounts, which direct debits already do, but enable them to cap how much is pushed out for any given payment and cap the total amount that is paid out over a certain period.

In a joint statement, the Financial Conduct Authority and the Payment System Regulator, which jointly oversee the JROC, said: “Open banking can be a UK success story and we want to help it grow and develop sustainably. Today’s report sets out a roadmap and the framework for delivering the next phase of open banking.

“Only through effective collaboration can we deliver on our ambition and develop open banking in a way that promotes continued innovation and competition, for the benefit of consumers, businesses and the wider economy.”

According to a recent report from independent advocacy group the Coalition for a Digital Economy (Coadec), more than 4,800 people work in open banking in the UK and the industry raised over £886m last year.

In 2018, UK banks were required to implement the Competition and Markets Authority (CMA) open banking regulations, which led to the development of application programming interfaces (APIs) in banking to give consumers more control over their accounts.

The end goal was to increase competition in a sector dominated by big financial services companies. Customer banking data is shared by the industry through APIs, with customer permission, enabling businesses to offer tailored products.

More than seven million people in the UK used open banking last year, marking five years since the competition regulator forced banks to introduce services. According to figures reported to Open Banking Limited building societies, two million users were added in the past year.

City minister Andrew Griffith said: “Britain leads the pack in open banking, with 7 million users, but we can’t sit back and put our feet up. Today’s plan will deliver a new generation of products and services, making banking more accessible and convenient for millions of people.”

Janine Hirt, CEO at fintech trade body Innovate Finance, said: “We welcome the focus of next steps on improving performance and implementation by all banks, on further action to tackle fraud, and on supporting open banking payments services, and other non-sweeping variable recurring payments products. These are key projects which our members have identified as priorities. We now need to see pace and momentum.

“We also welcome the government’s commitment to not only improve open banking but to developing a roadmap for extending open finance to other financial services and wider uses of open data. Taken together – open banking, open finance and open data – these provide the foundation for future innovation and consumer benefits.”

Hiroki Takeuchi, co-founder and CEO at GoCardless, said the report is an important milestone in the UK’s open banking journey. “We welcome JROC’s prioritisation of the roll-out of VRPs so that more UK businesses and consumers can benefit from them. I’m also pleased to see a focus on technical, but important, issues which need resolving in the background.

“Above all, the report highlights the need for government, the regulatory authorities and industry participants to work together for JROC’s vision to be achieved. There isn’t a moment to lose and we’re excited to play our part,” added Takeuchi.

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