UK consults on Open Banking plan

UK consults on Open Banking plan

The UK's Competition and Markets Authority is seeking feedback on 17 measures - including the introduction of Open APIs - designed to kick start competition in the market for personal and business bank accounts.

Following a two-year investigation into the sector, in August the CMA set out its technology-driven plan to help smaller providers and new entrants take on the big banks and force them to work harder for their customers.

At the centre of the organisation's report is the concept of Open Banking, the use of technology to provide customers with more control over their accounts and financial services.

This means banks being required to introduce an Open API (application programming interface) banking standard by "early 2018" to enable personal and SME customers to safely and securely share their unique transaction history with other providers and trusted third parties.

The CMA is also demanding that banks provide technical support and financial backing to an initiative by independent charity Nesta to develop a set of tools providing comprehensive information about bank charges, service quality and credit availability.

Banks will have to help customers avoid unarranged overdraft charges by texting them when they are at risk of going overdrawn, and also help customers compare the service they get with other providers.

The 17 measures are now up for consultation, with responses to a draft order invited by 23 December.

Alasdair Smith, chairman, retail banking market investigation, says: "These reforms will fundamentally transform banking for personal customers and small businesses. They will break down barriers, increase competition and give customers control over their own money.

"Taken together we expect our remedies to deliver direct benefits to customers of between £700 million and £1 billion."

Despite the bold claims, some have complained that the plans do not go far enough. Back in August, Kevin Mountford, banking expert at MoneySuperMarket, said: "Those looking for wholesale reform of the banking market are likely to be holding their heads in their hands this morning. The CMA’s final remedies are more ‘gently does it’, as opposed to the seminal, watershed moment for British banking that many had been looking for."

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