The future of open banking in the UK
Issue 473 | 27 April 2023
Plans for the future of open banking
Financial regulators in the UK have laid out their plans for the future of open banking. The Joint Regulatory Oversight Committee (JROC), co-chaired by the FCA and the Payment Systems Regulator (PSR), say the measures will bring "opportunities for new products and services, allowing consumers and businesses to share data and make payments in more convenient and efficient ways".
The JROC report also sets out its vision for a new entity to replace the Open Banking Implementation Entity in guiding the future roadmap and the principles that will underpin a long-term regulatory framework, which the Government is intending to legislate for.
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.
JROC co-chairs: co-chairs of the committee, PSR’s managing director, Chris Hemsley, and FCA’s executive director, consumers and competition, Sheldon Mills
Ten key points
You’ll find the Joint Regulatory Oversight Committee (JROC) report here: Recommendations for the next phase of open banking in the UK.
Comprising of 48 pages the report is clear, concise and (very) ambitious - the payment aficionados amongst us will have already devoured the full report but, for the rest of us, here’s ten key points from the report.
1: Three key priorities
JROC have identified three key priorities to deliver its vision:
2: Enter a new regulatory framework
JROC state that the government is committed to creating a long-term regulatory framework to secure the existing achievements of open banking, unlock its future potential and ensure a sustainable economic model is in place.
The current model, in which OBIE is overseen by the CMA for obligations under the CMA Order will transition (subject to the CMA’s consent) to a sustainable long-term regulatory framework. In the Treasury’s view this means that the FCA should regulate firms in relation to the provision of open banking services, including payment initiation and data sharing requirements, and the PSR should regulate the open banking services that relate to a payment system and participants in that payment system.
JROC: Recommendations for the next phase of open banking in the UK - Para 2.22
3: The need for compatibility
Open banking currently has a significant reliance on an underlying payment system, Faster Payments, to facilitate payments. This payment system is overseen by Pay.UK and regulated by the PSR.
The PSR will continue to monitor Pay.UK’s work to deliver the NPA and aims to ensure that developments in open banking are compatible with the transition from Faster Payments to NPA. We expect that Pay.UK and the OBIE (and the subsequent future entity) will need to coordinate closely to consider open banking developments and how those impact the obligations Pay.UK puts on Faster Payments (and later NPA) participants.
JROC: Recommendations for the next phase of open banking in the UK -Para 2.35
And
The Committee has reviewed the Trustee End of Implementation Roadmap Report, which outlined that setting up the future entity as a separate organisation would allow for the clear demarcation of liabilities. It also said that the Committee should future-proof the future entity by designing it in a way that is compatible with other large infrastructure projects such as the NPA, open finance/smart data, and the pensions dashboard.
JROC: Recommendations for the next phase of open banking in the UK - Para 3.16
4: Behold the successor
OBIE’s successor will play a central role in the ecosystem:
We …. expect the future entity to play a central role in the ecosystem. Its purpose and objective will be to support the development of new, and improve existing, open banking propositions. This will promote competition and innovation within the financial sector for the benefit of consumers and businesses. It will do so by improving existing and developing new standards and guidelines for all ASPSPs and TPPs which, in turn, will ensure consistent user experiences and interoperability across use cases.
JROC: Recommendations for the next phase of open banking in the UK - Para 3.3
5: Emerging thinking on the core functionality of the future entity
JROC’s emerging thinking on the functionalities of the future entity focuses on core and support services are focussed on core and support services:
Core services are services that are fundamental to open banking’s continued development, which are expected to be funded by members of the future entity.
Support services are non-core services with a range of delivery options, and may be funded by those who use them.
6: Design principles
In the coming months JROC plan to undertake further work with open banking participants and other stakeholders to develop detailed design proposals for the future entity and will seek to be guided by the following principles:
The future entity will support competition and innovation within the open banking ecosystem and promote positive outcomes for consumers (including those with vulnerable characteristics) and businesses by convening and facilitating ecosystem discussions as well as developing new standards or updating existing ones to implement new products and services.
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