Open banking should expand ‘systematically’ as fintech criticises ‘data protectionism’ of big banks
Regulators should expand open banking rules “systematically” in order to save customers thousands of pounds across a variety of different financial products, experts told Morning Wire.
With stakeholders consulting on the next stages of open banking, many in the sector have suggested regulators need to be bold in expanding data sharing rules into new financial products.
Many products are currently outside the frameworks for data sharing, which has mainly focused on current accounts.
“Unless we systematically expand open banking, our citizens and small businesses will miss out on opportunities to access and control their financial data to improve financial health, productivity and sustainable growth,” Adam Jackson, director of policy at Innovate Finance said.
Jackson argued that the obvious next step for open banking is to move into payments. While open banking makes innovations in payments easier, it is currently not included in the regulatory framework.
The Payment System Regulator is currently leading a working group to look at implementation plans for open banking payments which it hopes to have ready this autumn.
With changes in legislation, the regime could also expand into savings accounts, mortgages and credit products. Politicians are currently considering the Data Protection and Digital Information Bill, which would enable regulators to move faster on these areas.
“During a cost of living crisis this is all the more urgent, to help people plan and manage their finances,” Jackson said.
Some fintechs have expressed frustration at the difficulties in ensuring customers are able to access their own financial data.
Cardeo, a fintech firm that uses open banking to help customers reduce credit card debt, estimate that 60 per cent of the UK credit card market issuers – including all the big high street banks – refuse to share aspects of customers’ own data, costing them millions.
Card issuers are required to allow third parties to access customer data under open banking rules, but many banks have made it difficult to access information contained in monthly statements, such as the repayment date and interest rate.
“These banks are hiding information from their own customers – purely for profit. It’s data protectionism on a colossal scale,” Cardeo boss Gavin Shuker said.
“There’s no reason for the government and regulators to continue to sit on their hands when open banking in the consumer credit market can transform this old and tired industry,” Shuker said.
Helen Child at Open Banking Excellence suggested that moving the repayment of credit card balances is one of the “leading” use cases for open banking.
A number of fintechs have developed new forms of payments which Child said are “faster, cheaper and more secure than legacy payments”. An example is variable recurring payments, a cheaper and more efficient alternative to direct debits.
“If everyone in Open Banking laces up their trainers, we will see genuine alternatives to credit cards gain adoption and drive competition in the lending market,” Child said.
A Barclays spokesperson said: “We actively participate in the open banking ecosystem, working with all authorised third-party providers and following the regulatory requirements in order to help customers get the most from their finances.”
HSBC, Lloyds and Natwest did not comment.