The next steps for Open Banking: techUK’s response to the CMA’s consultation

The United Kingdom has reached an important stage for the development of Open Data initiatives, with the Open Banking Implementation Entity (OBIE) into the final roadmap for the implementation of Open Banking and the Competition and Markets Authority (CMA) having completed a consultation on the future governance model for Open Banking. This progress in Open Banking will affect other ongoing projects on data mobility in financial services and other regulated sectors and is critical to ensuring the UK builds on the success of Open Banking.

There are also a variety of stakeholders working on data mobility projects with significant crossover, including:

• the Financial Conduct Authority’s consultation on Open Finance
• the Fintech Review’s recommendation on Open Finance
• the Department for Business, Energy and Industrial Strategy’s (BEIS) consultation on Smart Data, engaging with industry on what is needed to take Open Data forward
• other regulated sectors investigating the best route to implement Smart Data initiatives, including the telecommunications sector

techUK has considered this backdrop in its response to the CMA’s consultation, calling for Government, authorities, regulators and industries to collaborate to secure the future of Open Banking but also of data mobility in regulated sectors to further develop competition, innovation and better products and services for all customers. techUK also highlights the importance of ensuring the funding model is fair and equitable and of investing adequate resources for consumer take-up.

What is Open Banking, and what stage are we at?

Open Banking is an initiative launched by the CMA in 2017 following the Payments Services Directive and the CMA’s Retail Banking Market Investigation. It allows consumers and SMEs to share their bank account information securely with trusted intermediaries who can then use this information to help them save time and money by finding better products to suit their needs.

Since its establishment, Open Banking now has around 3 million active users, and it is estimated that more than half of small and medium businesses use tools employing open banking functionality.

The OBIE’s final roadmap provides the steps required to finalise the implementation of Open Banking. Industry, the CMA and other key stakeholders are now engaging on the future governance model for Open Banking.

The importance of securing the future of Open Banking

The OBIE has enabled Open Banking to successfully take off, making the UK a pioneer in Europe and a model for other jurisdictions across the world. The transition from the governance framework during implementation to a permanent governance framework is critical.

While a long transition has disadvantages, it is nonetheless preferable to a rushed transition or any uncertainty as to the future of Open Banking which could put at risk an entire ecosystem and stifle innovation and competition, sending the wrong message to the UK’s vibrant fintech community.

A new body, its remit and governance

The OBIE has had a crucial role in making Open Banking a reality through monitoring, standards and ecosystem building. Recent work from the Financial Conduct Authority on Open Finance and the work from BEIS on Smart Data have also added significant value in progressing Open Data initiatives.

However, techUK believe more coordination and collaboration is needed between all parties involved, including the CMA, HM Treasury, the FCA and BEIS, on the UK strategy for Open Data initiatives. Contribution is required from all these entities, but there is a risk of redundancy, confusion and inefficiency if a myriad of new bodies is set up.

Companies cannot be faced with multiple different regimes overseen by different sector-based regulatory bodies. Top-level, commonly agreed principles to underpin data sharing, addressing common issues to do with security and the ethical use of data, are needed irrespective of the sector of operation. These general principles should govern the activities of players across sectors and protect the interests of consumers, providing clarity to consumers, generating trust and offering certainty for the industry.

A more equitable funding model

The ecosystem is more mature, and whilst the initial funding model has enabled Open Banking to kick start in the UK, it is indeed the right approach that all parties contribute to the future of Open Banking and other Open Data initiatives. We will make Open Data initiatives a success if all parties find a common and commercial interest.

For all parties to contribute, it is critical that the fees are fair so that smaller players can keep benefitting from Open Banking and Open Finance and do what they do best: innovate, challenge the current state of play, and deliver valuable new services to customers.

It is also why governance is essential if there are uncertainties around the funding model or some decisions needing to be taken at a later date.

Consumers take up should also be considered as a priority as Open Data initiatives will only achieve benefits if taken up by consumers.

Read techUK’s response to the CMA’s consultation to find out more and get in touch if you want to find out more and get involved!