On 13th January 2018, open banking was launched in the UK after PSD2 legislation forced service providers to improve customer authentication and security processes. Since then, the UK’s largest account providers were able to make the most of their financial data and securely access services from a wider range of companies that better meet their needs. Dubbed as the first major milestone in a multi-year programme that opened all payment products to an innovative market for financial services, we are now celebrating open banking’s 6th birthday.
Open banking can be defined as “a new, secure way for customers to take control of their financial data and share it with organisations other than their banks. Open banking has the power to revolutionise the way we move, manage and make more of our money. For businesses, it is about making the management of cashflow and receiving payments cheaper and easier. Open banking will make things simpler, faster and more convenient.”
Further to this, open banking followed the Competition and Markets Authority (CMA) investigation into the provision of personal current accounts (PCAs) and of banking services to small and medium-sized enterprises (SMEs). Open banking as a concept was created to enable innovation, transparency and competition across UK financial services, and it endeavoured to do so by delivering Application Programming Interfaces (APIs), data structures and security architectures that enable developers to harness technology so that individuals and SMEs can share financial information held by their banks with third parties.
Open APIs were then used by third-party developers to build applications and services for a wide variety of financial institutions – known as open finance. These services include mortgages, savings, pensions, insurance, and consumer credit. Open finance also levelled the playing field for the banking industry and provided consumers with an even better customer experience. Open finance enables wider integration to include non-financial industries, such as healthcare and governance, and the ability to provide personalised solutions in support of financial inclusion. The journey from open finance to open everything.
Six years on, where are we now?
In January 2023, the CMA declared the open banking implementation roadmap completed and the launch of the Joint Regulatory Oversight Committee (JROC), which would be led by the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR). Recommendations on the design of the future entity and the vision for open banking were set out and three priorities were identified.
JROC’s priorities are: to establish a sustainable and competitive footing for the ongoing development of the open banking ecosystem so that it can grow beyond the current functionalities and bring further benefits to end-users; to unlock the potential for open banking payments; and to adopt a model that is scalable for future data sharing propositions.
In June 2023, JROC planned a programme of work to take forward these recommendations for the next phase of UK open banking, which involves setting up dedicated workstreams and working groups on variable recurring payments (VRP), for example. The JROC’s recommendations also contain a roadmap of priorities over the next two years, covering five key themes: levelling up availability and performance; mitigating the risks of financial crime; ensuring effective consumer protection if something goes wrong; improving information flows to third party providers (TPPs) and end users; and promoting additional services, using non-sweeping variable recurring payments (VRP) as a pilot.
What is the honest opinion of the fintech industry about the progress open banking has made in the last six years?
What is the sentiment of the fintech industry on these most recent developments?
PSR spokesperson: “Over 7 million people and businesses are using open banking to manage their money. Innovative services provided by the UK’s thriving fintech sector have helped them to save time, money, make it easier to access products and services, and make payments. We’re supportive of the growth seen so far and excited about the next phase to allow more of us to realise the benefits of data-driven financial services.”
Charlotte Crosswell, chair of CFIT and former Open Banking trustee: “On reflection, when open banking was in its infancy, there was a widespread under-appreciation of the complexity of the problem it would solve, and how long this would take. In that context, while the journey has been challenging at times, there has been some phenomenal progress. While some of this has been in different directions than originally envisaged, key achievements have been to create alternative account-account payment methods and to kick-start the kind of secure data-sharing that is essential in a world where financial services are increasingly fragmented. Moving beyond the scope of the original CMA order has also opened up future opportunities such as variable recurring payments (VRPs), or 'smart direct debits', to give people more control over their regular payments. The overall result has been that the UK has led the world in the adoption of open banking, with some 80 countries following our lead. We have built strong foundations on what will come next as open banking moves beyond the CMA order, and we move into a world of open finance and a smart data economy.”
Francesco Simoneschi, CEO, TrueLayer: “Open banking’s progress has been undeniable and transformational. Since 2018, when the enabling regulations came into effect, we've seen growth from zero to over 7 million users. The focus of open banking has also shifted in that time from using data for financial management and use cases such as enabling customers to view all their accounts in one place, or sending financial information to a service provider. Today open banking is driving most value through enabling cheaper, faster and safer payments with over 12 million monthly payments valued at more than £4.5 billion. TrueLayer has played a leading role in shaping these trends — we are working with the world’s biggest merchants to drive the move for adoption of open banking payments in areas like ecommerce and beyond. As open banking continues to evolve, through innovations like variable recurring payments, the potential for future growth is huge.”
Rob Levy, director of open banking and digital platforms, Barclays UK: “It’s been an exciting six years! In a short space of time, the UK has become a world-leader in the delivery of open banking, with many other advanced economies taking our lead. The ability for consumers to link their financial data has delivered benefits beyond greater transparency, but has also paved the way for innovative new financial tools that help customers manage their money, financial health and access credit, promoting a more dynamic financial landscape. The infrastructure created through open banking allows us to shift focus towards delivering new, engaging products and services that meet the needs and expectations of consumers. Going beyond regulatory requirements – ensuring that open banking solutions are relevant, user-friendly, personalised and seamlessly integrate into customers’ financial lives – is key. We’ve come a long way in six years, so success for the future hinges on open banking’s ability to offer tangible value to consumers. Regulations have set the stage, it now should be up to the industry to take the lead in developing products that resonate with consumers.”
Stephen Wright, head of corporate and regulatory APIs, NatWest: “Open banking in the UK is a success, but it still hasn’t reached its full potential. Progress has been held back recently by regulatory uncertainty and a lack of sustainable commercial models to drive innovation and greater customer choice. To unlock the full potential of open banking for businesses and consumers, the government needs to provide a clear vision for the future and encourage better collaboration across the industry. Without this clarity, there is also a risk that the transition to open finance will be delayed by paralysis and lack of market investment.”
Tim Waterman, chief commercial officer, Zopa Bank: "Whilst there are still challenges in its implementation, the CMA’s clear mandate and the OBIE/JROC's regulatory driven approach have already produced real and tangible progress. Despite low awareness, the introduction of open banking to untapped verticals such as access to credit could spearhead wider adoption. Consumers have told us they will use open banking if it helps them with things they truly need and value, such as cheaper and easier access to credit. While we have achieved a lot in the first 6 years of open banking innovation, long-term financial planning requires a much broader set of data to offer truly useful services, educated recommendations, and insights at lower costs. We’re now beginning to see a transition from open banking toward open finance, extending data rights to a much wider scope of financial data including savings accounts, investments, insurance, and pensions. This transition will ultimately lead to consent-based consumer rights over their financial data that benefit millions of customers and business."
James Lynn, co-founder and CEO, Currensea: “Overall, there has been strong progress especially in areas such as the reliability with the major banks. However, momentum has clearly slowed and there remains some irregularity over compliance across the industry - some players remain reliant on the Modified Customer Interface (MCI) despite the FCA requirement to implement APIs. There is also an occasional lack of reliability in integrating open banking functionality with some lower-volume financial providers. Although open banking adoption has been accelerating, it’s concerning that progress in other areas appears to have stalled in recent years. The UK was a genuine world-leader in open banking for many years but there is a danger of the industry resting on its laurels and other markets beginning to gain ground, and in some areas, begin to overtake. A more concentrated effort is needed in areas such as Variable Recurring Payments (VRPs) to regain the UK’s leading position.”
Anish Kapoor, CEO, AccessPay: “Over the past six years, open banking has made significant strides, yet there's still ground to be covered before it replaces cards for consumer use. The primary challenge lies in the user experience, which remains cumbersome. This aspect significantly hampers widespread adoption. Additionally, there's a prevalent confusion in the corporate sphere regarding its applicability, stemming from its original intent not being entirely clear.”
Hannah Fitzsimons, CEO, Cashflows: “The past six years has been an exciting and transformative time for the fintech industry – however, there is still a long way to go. Organisations such as Open Banking Limited are doing a great job at setting the infrastructure standards that allow open banking to function, which in turn has generated a surge in the financial services provided via APIs. These new services have facilitated successful collaboration between banks and fintech companies to develop solutions that improve the customer experience, despite limited consumer awareness. Looking at the year ahead, this will change. Awareness of open banking among consumers and businesses will increase as the benefits become clearer. Take authorisation rates for example, open banking is leading the frontier in payment success rates. People enjoy methods that ensures the payments process is quick, seamless and easy, therefore impressive authorisation rates may help improve adoption. There is still a way to go for open banking to be the first choice, but progress continues to be made on a steady path. Furthermore, there is a saturation of open banking and fintech businesses in the UK. Change to this seems likely in order to be sustainable in a market where profitability is highly prized.”
Sheraz Dar, CEO, Creditladder: “Progress has been slower than I would have liked - it feels as though obstacles have been placed in the way that has slowed down continuous adoption. The biggest issue for me remains the 90 day reconnect. Yes, it is now more straightforward to reconnect, however it is still the number one reason for churn in many businesses that provide an offering that uses open banking. The failure to extend the consent period when OBIE was in place showed an embarrassing lack of willingness to fix a problem that had been highlighted by a number of fintechs.”
Neil Kadagathur, CEO and co-founder, Creditspring: “Over the past six years, the depth of insight provided by open banking has enabled the creation of more personalised and responsible financial products. The emergence of new apps, technologies and services that can more accurately assess customer’s eligibility for credit has helped to bring more inclusion to lending. Now, typically underserved populations such as sub-prime borrowers, have more accessible credit options that are tailored to their financial needs. Lending is arguably one of the areas that has benefitted most from open banking in the past six years. Equipped with a wider range of data points, lenders can more accurately assess creditworthiness and affordability of prospective borrowers. Going beyond traditional forms of credit assessment, open banking allows lenders to gain a wider understanding of an individual’s current financial situation, opening the doors to far more personalised forms of support. At Creditspring, we are now achieving an uplift in the income verification rates of our customers by up to 20% where presence of income could not be confirmed by the visible data available to traditional credit rating agencies. More lenders must consider adopting open banking technology if consumers are to feel the benefits of industry innovation.”
Paul Speirs, managing director, consumer information services, Experian: “Open banking progress has been steady over the last six years – and has transformed the customer lifecycle giving organisations a holistic, comprehensive view of someone’s financial behaviours. For example, open banking has been incorporated into eligibility journeys to support decisioning. Price comparators have sought to partner with lenders to capture open banking data to inform a customer’s eligibility for credit at the start of the credit journey and provide a better match between what a customer can truly afford, benefiting both them and the lender. It's not just in the application process that open banking is having an impact. It is being used in the utilities sector to assess quickly and accurately if customers are eligible for social tariffs, doing away with the need for the customer to supply bank statements, as well as track any changes in affordability, so the customer can be supported in the most appropriate way. Similarly, some lenders have replaced bank statements using open banking to digitise the mortgage application experience and improve their quality of customer service.
Mark Horwood-James, managing director PFT, Moneyhub: “Open banking has made fantastic progress in the last six years, largely driven by the UK, but there is so much more to do. For example, not enough consumers are seeing the big potential gains - such as accessible personalised advice or easy switching of services - that they could, or should access. We also still have a vast number of opportunities and ways that open banking, and more broadly open finance, can improve outcomes for consumers and businesses alike which are incredibly exciting. Industry leaders and innovators need to seize these opportunities now and unlock the untapped potential available.”
Holly Coventry, vice president, international open banking payments, Pay with Bank Transfer, American Express: “Open banking has made significant progress in the last six years. Initially, the data sharing abilities powered by open banking were touted to be its greatest opportunity, but particularly in the last three years, payments have emerged as the key area for innovation and growth. Demand for open banking payments from both consumers and merchants is picking up pace. Data from Open Banking Limited shows payment numbers doubled year on year, soaring to over 68 million transactions in 2022 from 25 million in the previous year. However, while awareness and adoption of open banking payments from both consumers and merchants is accelerating, there is still work to do before it can reach its full potential. We are standing on the precipice of opportunity. In the travel and utilities industries, for example, open banking payment methods are now relatively well established, thanks in part to the very clear use case for merchants allowing them to directly address common challenges faced by merchants in these markets by offering speedy, secure payments at a lower cost. Building consumer trust and understanding is essential to drive wider adoption across other industries. Our recent research in December found that 91% of people understand the concept of open banking payments and over half would consider using it for future payments. These findings highlight that while there is a promising awareness of open banking, we must work together as an industry to focus on providing the necessary education to facilitate its uptake as consumer demand will in turn increase merchant appetite to provide these payment methods.”
Magali Van Bulck, head of EMEA policy, Wise: “When open banking first launched, we approached it with lots of enthusiasm. As one of the early adopters, Wise got significant market share in a short amount of time. We believe that it can genuinely be a viable and lower cost alternative to cards, but these past six years have been full of teething issues which required a lot of bilateral testing - something the UK’s harmonised approach should have mitigated. That’s before we even get into the EU, where the lack of a single standard meant that for most firms, it’s been hard to get significant open banking traction.”
Kush Shah, product lead, open banking, Bottomline: “Open banking has continued to demonstrate success and growth, with wider adoption across businesses and increased adoption by consumers and payers. The foundations set out by the industry, involved parties, regulators and businesses laid a good pathway for growth while providing room for innovation, which we are continuing to see across the board. The industry and economy is seeing key sectors adopt the use of open banking, with a wide range of capabilities being used, from single payments to newly introduced recurring payments, account information services and enhanced information, which is simplifying several business processes and enhancing consumer offerings. There are, however, a number of key challenges which require additional investment to truly realise the potential, examples of which include standardisation, scalability and performance - without agreement and commercial incentive for both end-users and parties within the ecosystem, the growth potential will not be realised.”
Tom Wijnen, product marketing manager, Worldline Financial Services: “The promise of open banking has not yet materialised fully. This is the case in the UK, but even more so in mainland Europe. There are some hurdles that were obvious, such as the differences in APIs and processes from the banks (different codes, no or limited status information, pre-steps to acquire information, etc.), but also some less transparent ones such as lack of consumer adoption (due to limited ease of use and no recognition and trust in an ‘open banking’ brand). In addition, there was the absence of a balanced and sound business model with too much of a focus on compliance. However, a start has been made and the different players in the industry are getting more accustomed to the new open market.
In our opinion, progress is made in tackling the different hurdles both from a regulatory and a market perspective, which will allow this market to flourish in the next two to three years. We did notice a shift: where the market first focused on data-related use cases, currently the payment-related use cases are explored more often. Also, at the start there were many providers in the market, whereas we see now numbers are decreasing.”
Will the JROC be able to enable open banking to develop further in a safe, scalable and economically sustainable way?
Across the interviews that Finextra conducted with industry leaders, there are a range of ‘honest opinions’ about open banking. While it is certain that a lot has happened in the past six years, it is also evident that open banking still hasn’t reached its full potential. Moreover, the JROC’s recommendations are strong statements and to ensure financial services can be developed in a safe, scalable, and economically sustainable way is a colossal ask.
Euan Ballantyne, head of product at Pay.UK remains positive and states that the JROC’s review and recommendations were an “excellent example of regulators and the industry working together to understand today’s challenges and identify tomorrow’s opportunities. These recommendations and the 2024 workplan are a significant step in realising the full potential of open banking in the longer term. I was personally very impressed by the high level of positive energy and engagement across the open banking community in further developing open banking payment solutions. In 2024, Pay.UK will continue to work closely with Open Banking Limited and the broader community to enhance the end-to-end payments journey and improve the customer experience.”
However, Currensea’s James Lynn believes that “time will tell whether the JROC has the teeth to achieve its goals - hopefully the committee is able to take a robust approach to accelerate the development of open banking rather than acting in an advisory capacity.” Jay Swanston, chief platform officer, Moneybox, took a practical approach and mentioned that these recommendations are “simply themes that they [JROC] would like to pursue. However, it’s certainly important that the bodies responsible for oversight ensure that the availability and performance of the solutions is maintained. Setting in place a framework to track and assess these things early in their evolution will, inevitably, be simpler than trying to do this over a more mature and diverse ecosystem.”
Swanston continued to say that “availability of customer redress will be vital to ensuring effective adoption. At present adoption is still limited to those who have a natural propensity to this type of technology and proposition. Convincing the more sceptical customers to use a technical solution for which there is no direct or clearly set out redress process will be an uphill struggle. Direct Debits only succeeded (and it took quite a long time!) because of the Direct Debit Guarantee. The design of any redress process will need to learn from the Direct Debit Indemnity process. While it is important to provide effective redress for customers this must not be deployed by default as a means to reverse properly made transactions since that would have a severe knock-on impact on providers of the services.”
Wise’s Magali Van Bulck also has a good point that must be considered. “We can’t look to JROC alone to fix some of open banking’s growth pains. There needs to be true UK strategy and vision for payments, where all regulatory bodies coordinate and work towards the same goals. The Future of Payments Review and the Government’s National Payments Vision can help us get to a more coherent payment experience, which also addresses other important issues such as combating fraud (not just in open banking), delivering on the New Payments Architecture, or further levelling the playing field between fintechs and banks.”
Can non-sweeping variable recurring payments (VRPs) go mainstream in the UK?
Variable Recurring Payments (VRPs) are a payment instruction that lets customers safely connect authorised payments providers to their bank account to make payments on their behalf in line with agreed limits. The CMA mandated nine UK banks (the CMA9) to implement a VRP open banking API to enable easier sweeping of funds from a customer’s current account to another of their accounts. This includes Barclays and NatWest, the only two CMA9 banks that responded to Finextra’s request for an interview on the progress of their open banking roadmap.
Sweeping, which can be defined as the automatic transfer of money between a customer’s own accounts, was mandated for the CMA9 to provide and these banks must offer open access to the VRP API for sweeping. It is now common knowledge within the industry that VRPs offer more control and transparency than existing payment alternatives, such as Direct Debits and card-on-file instructions. VRPs also offer ongoing permission to take payments, within agreed rules, enabling a more seamless and secure way to pay for goods and services.
Non-sweeping VRPs, on the other hand, have not been mandated by the CMA, so the CMA9 are not obliged to provide these payment services, and if sweeping VRPs are not mainstream, it could be argued that there is a long way to go before non-sweeping VRPs become more popular. Moneybox’s Jay Swanston has this view: “This rather presupposes that sweeping VRP are mainstream! That is not a given fact. The costs to providers of operating sweeping VRPs are around five times the costs of a Direct Debit. That cost increase will not make sweeping VRPs the chosen approach for many. At this juncture, it is not clear where the relevant banking providers will position their tariffs for non-sweeping VRPs. It rather depends on what they perceive the non-sweeping VRP is an alternative for. If it is an alternative for a regular card payment then the tariff is likely to be high. If, on the other hand, it is seen as an alternative for a Direct Debit then the price point is an order of magnitude lower. That will be key in determining the viability and hence take up.”
Mark Munson, managing director payments, Moneyhub believes that the UK has been a “frontrunner in open banking adoption, and non-sweeping or commercial VRPs can offer a more flexible and user-friendly payment experience compared to traditional methods such as Direct Debit which is 60 years old this year. They allow for easy management and adjustment of recurring payments, which can appeal to consumers seeking more control over their finances. However, it is not consumers that will drive VRP adoption, it is the billing companies that are currently using Direct Debits and card on file who will need to lead the way.
“The most innovative of which will recognise the early mover advantage of adopting a more flexible solution, offering greater choice for consumers and building new commercial offerings. However, whereas sweeping VRPs are cost effective solutions for fintechs, there remains concern that banks are pricing non-sweeping VRPs in a similar way to continuous authority card-on-file transactions, thereby providing little incentive for existing customers to adopt new services. Card interchange fees, although much maligned, do provide some consistency of charging for merchants, at present it seems likely that individual banks may have their own charging structure for non-sweeping VRPs which add a level of uncertainty that could be the death-knell of the proposition. Financial benefit realisation remains a key determinator on where developments sit on any product roadmap.
“Additionally, VRPs suffer from an identity crisis, few people outside of the open banking community have heard of them, or appreciate the value they bring. Placing your card on file with a merchant may have security considerations, but it is simple to understand for most consumers, and as already mentioned Direct Debit has had 60 years to establish its credentials with the general public and has become synonymous with regular payments. Additionally, the lack of comprehensive, tried and tested, consumer protection controls such as the Direct Debit Guarantee in the UK, which provides a refund right in case of an error, can be seen as hurdles that must be overcome before there is widespread adoption of VRPs.
“Non-sweeping VRPs offer a consumer-oriented, flexible, and secure method for recurring payments, aligning with the core principles of open banking. They provide an alternative to traditional methods, potentially with lower costs and greater control for the customer over their financial transactions. It is early days for non-sweeping VRPs, and it will take time for them to establish themselves as a mainstream alternative to the established methods. But the potential is certainly there and the ‘killer-app’ use case is probably already in development.”
American Express’ Holly Coventry adds that “there is certainly a strong desire for commercial VRPs to go mainstream in the UK, from both merchants and consumers who have a prevailing requirement for payments to be as simple and secure as possible. By communicating the benefits of VRPs to consumers, we can help drive their adoption further. Our research found that consumers see security, ease of use, and speed as the top three factors which would encourage them to use Open Banking for future payments.
“But the devil is in the detail. It’s vital that we continue to collaborate as an industry to ensure we get the right outcome for merchants and consumers in terms of protections and liabilities. There is a huge amount of work and a focus on innovation within the fintech and banking community to ensure this happens.
“The creation of JROC’s VRP working group will also help to accelerate and ensure meaningful progress. In December 2023, JROC published its response to the VRP working group’s blueprint for non-sweeping VRPs, with recommendations for phase one rollout to take place in Q3 2024. They acknowledged that the functional capabilities to roll out VRPs already exist, but collaboration from within the ecosystem is key to ensure they are built upon and there is certainty around things like dispute handling, and payment reference information. The recommendations and roadmap are encouraging and show a recognition of the potential of VRPs, particularly as a stepping stone to enabling wider use of open banking-initiated payments.”
Andrew Boyajian, head of VRP, Tink, said to Finextra that "2024 is the year we can really expect variable recurring payments (VRPs) to realise its full potential." They also “remain positive on the progress of the JROC objectives on Variable Recurring Payments. It’s a welcomed opportunity to help inform and define the roll out of VRP for commercial use-cases. Our hope is that this work can carry forward open banking's momentum in the UK and support the growth of account-to-account payments. The UK has undoubtedly been one of the leaders in this area and there is a clear opportunity to further be seen as a model for other markets.
“One of the primary obstacles hindering the progress of VRP lies in the lack of principles and standards. Banks have faced difficulties in negotiating multiple bilateral agreements with third-party providers (TPPs), resulting in slower advancements. To address this, JROC aims to develop standard approaches and a common language for liability and dispute management, which can be seamlessly integrated into the VRP experience. Having some of these standard principles will allow competition amongst the TPPs as well - and that ultimately benefits end users. Because they're figure out ways to create those selling points for them that are unique, which should translate to benefits to either merchants or billers or consumers.”
How will regulation, such as PSD3, continue to stimulate open banking innovation and competition, and ensure interoperability?
In June 2023, the European Commission decided to amend and modernise the current Payment Services Directive (PSD2) which will become PSD3 and establish, in addition, a Payment Services Regulation (PSR).
What does the future hold for the seventh year of open banking, with all this regulatory change?
Jan van Vonno, head of industry and wallets, Tink, mentions that “2023 has been an important year for regulation that lays the groundwork for the advancement of open banking and open finance in the EU. The renewed drive that PSD3/PSR provides is a welcome addition to the development of open banking in Europe. We are encouraged by many aspects of the new proposals improving open banking, such as the benefits in giving authorities the required tools to better evaluate the dedicated interfaces (APIs) provided by banks and other financial institutions. Furthermore, there are three very important upcoming regulatory milestones for 2024, which will be re-shaping the payments ecosystem over the next three to five years.
"The forthcoming Instant Payment Regulation has the potential to be a real game-changer. The widespread availability of instant payments across the Eurozone was one of the missing bricks in making account-to-account payments a compelling payment method for merchants. In addition, the proposed European Digital Identity Regulation will come with the introduction and EU-wide acceptance of a government-issued EU Digital Identity Wallet (EUDIW). The EUDIW is a big leap for identity authentication. It means that services similar to Sweden’s BankID will become ubiquitous across the EU. This not only renders some of the biggest challenges with SCA obsolete, but it can also bring a revolutionary shift in payments where both payer and merchant identities seamlessly become part of the transaction process.
“Finally, the European Payment Council’s SEPA Payment Account Access (SPAA) scheme introduces a commercial framework for Premium APIs to unlock differentiated payment capabilities and address challenges created by common current account limitations – such as daily payment limits. This scheme will help to give asset holders (such as banks) an opportunity to generate a healthy return on their PSD2 investments. We hope to find many banks joining the scheme as it will allow for the creation of payment guarantees, dynamic recurring payments, and automated sweeping capabilities between accounts in the same name.”
Beyond this, according to Sara Costantini, regional director, CRIF UK and Ireland, while “PSD3 aims to remove barriers to providing open banking services, protect consumers and their personal information and stimulate competition in the payments industry, it’s important to be conscious of ‘moving the goalposts’ for Account Servicing Payment Service Providers (ASPSPs). In parallel to any additional changes, the industry must find a sustainable framework for renumeration.
“Now that the UK has left the EU, we’re concerned there will be a further diversification in the implementations between the two, and we’d encourage regulators to try and keep the two sides in-line as much as possible. Doing so will be beneficial to end users and industry alike. More broadly, when it comes to open finance and the next phase of open banking innovation, the Centre for Finance, Innovation and Technology (CFIT) is undertaking some really important work that will shape the future of banking and finance in the UK for years to come.”
Richard Ransom, head of solution consulting for corporates, Bottomline adds that “regulations have helped ensure adherence to a single standard. However, this was only mandated for a limited number of banks in the UK, and there have been some instances where innovation has resulted in more market-beneficial propositions, resulting in other parties and participants diverging from these standards. Regulations will continue to provide guidance and lay out the framework; however, the industry should not solely rely on regulation in order to drive forward better innovative solutions for consumers and businesses. The market should learn from positive divergence to drive standardisation and form future regulations whilst also using regulation as a means of enabling fair competition.”
In closing, the PSR provided comment on the future of regulation for the payments industry. “Interoperability of open banking payments across technologies and countries is a key challenge in its development. New legislation can help streamline existing services and support the development of new APIs which can deliver further innovation. It’s really important that any developments help provide a simple and intuitive user experience so more merchants want to offer open banking payments to their customers. New powers are also crucial in giving PSPs and regulators more tools to combat fraud to keep people and businesses safe and further build trust in open banking services. In the UK, we are supportive of the draft Data Protection and Digital Information Bill to deliver the new regulatory frameworks needed for the sustainable growth of open banking.”