Open banking boost as regulators vow to support innovation and consumer protection
Regulators have set out their plans for the next stage of open banking as they hope to push innovation and competition in the banking sector.
Under proposals announced today, a new long-term regulatory framework will be established to secure the “existing achievements” of open banking and “unlock its future potential”.
The FCA’s Sheldon Mills and the PSR’s Chris Hemsley, co-chairs of the open banking Joint Regulatory Oversight Committee, said: “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,” they continued.
As part of the plans, a new body will be created to help oversee the next phase of development, replacing the Open Banking Implementation Entity.
Additionally, the report sets out the principles which will guide the long-term regulatory framework.
The regulators have identified five areas of focus over the next few years. These include mitigating the risks of financial crime by enabling better collection of data and ensuring effective consumer protection through beefing up dispute resolution mechanisms.
The framework also hopes to improve information flows for example by ensuring consistent information on payment flows.
Regulators said that success in the next phase would be measured by “greater innovation, lower prices or costs and improved quality of services” thanks to competitive pressure.
City minister Andrew Griffith said: “Britain leads the pack in open banking…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.”
Launched in 2017, open banking is an attempt to boost competition in retail banking by forcing high street lenders to open customers’ data to trusted third-party firms.
Since its launch, it has garnered over seven million customers of which 750,000 are small or medium-sized businesses.
While it has significantly boosted the fintech sector in the UK, some firms have warned that progress has slowed recently. Industry figures warned that the UK was at risk of losing the first mover advantage it held for its early adoption of open banking.
Last month, a group of experts said “we remain enthusiastic about the long-term consumer benefits that open banking can unlock, but worry that progress is slowing,” arguing consumer protections were not always keeping pace with new data sharing rules.