FCA updates – progress with open banking implementation initiatives
- Open banking (sometimes referred to as “open finance”) is a continuing series of reforms in the UK to how banks deal with customers’ financial information.
- These reforms were intended to enhance competition in retail banking by allowing customers to share their transaction data securely with trusted third parties.
- The broad changes were first required by the UK’s Competition and Markets Authority (CMA) and followed the introduction of the second Payment Services Directive (PSD2) on 13 January 2018.
- The final stages of Open Banking implementation have been delayed during 2020 due to Covid-19 impacts but the final changes to underlying systems and processes are still expected to complete by 31 December 2020.
- Open banking services are part of a broader data-sharing initiative and will require coordination and consistency across sectors.
Open banking is part of many structural changes including emergence of big data, dynamic markets, consumer uncertainty and reducing trust in traditional service providers.
Retail consumers may gain access to cheaper credit and increased information enabling them to make their own independent financial decisions. Solutions being developed include open banking services, data portability and Digital IDs. Other examples include the development and increasing use of open Application Programme Interfaces (APIs).
These APIs allow Third Party Providers to create financial products, services and applications which leverage user data – provided with consent – to share across verified firms. Open banking’s APIs enable authorised or registered third party providers to access their customers’ account information and make payments on their behalf.
Other new services include the Account Information Services Provider (AISP) – which lets a customer see all their account information from different bank accounts in one place online or in a mobile app – and the Payment Initiation Service Provider (PISP) – which lets a customer pay companies directly from a bank account rather than using a debit or credit card through a third-party such as Visa or MasterCard. Any AISP or PISP needs a customer’s explicit consent before providing this kind of service.
Timeline with relevant dates to be logged on regulatory calendar
- Final changes to underlying systems and processes supporting open banking are expected to complete by 31 December 2020.
All firms need to be aware of the planned changes and to design revised processes and controls to support these initiatives. Firms should work closely with their usual FCA contacts for information and support.