All I want for Christmas is…an open banking entity that takes us into the next phase

We may be just a few short weeks away from the end of the year, but things are far from slowing down. In fact, this week centres around the latest abbreviations in the open banking world - SWG and JROC.

Back in March HM Treasury, Competition and Market Authority, Financial Conduct Authority and Payment Systems Regulator released a statement announcing a new joint regulatory oversight committee (JROC) to oversee the transition away from the OBIE to a new Open Banking entity. JROC then set up the Strategic Working Group (SWG) - a non-decision-making consultative forum whose purpose is to collate wider stakeholder views and inform JROC’s thinking.

This week is significant as it was due to mark the end of the SWG process, however, they have announced that they will now be submitting their final report to JROC in the New Year. Whilst it’s likely we won’t hear the outcome of JROC’s deliberations until the end of January, it’s made me reflect on what my Christmas wishes are for the future of Open Banking in the UK.

We need a strong successor to the OBIE

Whilst it’s exciting to think about the future and what could be next for open banking innovation, powering ahead with new regulations without ensuring full compliance of the existing ones is like deciding to build a new road without filling in the potholes in your existing ones first. Let’s take the progress on Variable Recurring Payments (VRPs) as an example. The Competition and Market Authority (CMA) first mandated a report to be created for the functional specifications and Customer Experience Guidelines for VRPs back in March 2020. Naturally, many of us were excited to see new technology being put into motion, but over two years and an extended deadline later, we’ve only just seen the launch of VRP for sweeping use cases. 

A significant part of this is down to many of the involved parties taking their time in building APIs, which has created a sense of low enthusiasm as not everyone has bought in on the longer-term value of what could be created. We need a firm hand from the OBIE’s successor to make sure that banks, financial institutions and third-party providers are all given the right incentive to take the current VRP products and evolve them into non-sweeping use cases too - adding better products at better prices into the market for customers. 

It’s time to address the open issues and improve customer experience

The open banking ecosystem has flaws. However, we have to remember that in payment terms, open banking is still in its early years and with the support of JROC and the SWG, a new regulatory authority has the opportunity to focus on the areas where we could significantly improve the customer experience. One area in particular that would benefit from being reviewed is high-value transactions via open banking. We've seen some industries with typically high-value transactions try to use open banking to collect payment and struggle. This is due to transaction limits being applied which effectively caps transaction sizes at unworkable levels, at least from a customer experience perspective. However, with the right approach that takes into account risk levels presented by the transaction, this could be solved. If the OBIE’s successor is able to mandate transaction limits, uniting banks and TPPs in being better prepared for large payment requests, it would unlock new industries and use cases. Plus, the savings on high-value transactions will be more significant and allow genuine savings to be passed onto the consumer.  

Let’s create a new, better payment landscape

To summarise my Christmas wish list:

1. Toughen compliance with the current standards under the existing CMA order

2. Prioritise existing areas of misalignment

3. Create genuine incentives to drive innovation and expand existing use cases

4. Improve customer experience

We’re at a really exciting juncture in the open banking roadmap and with wider stakeholder recommendations already being fed into JROC by the SWG, I have full belief that these wishes are actually closer to being predictions. 

JROC needs to find a sustainable framework for the future that blends regulation with commercial incentives, a carrot and stick, with customer experience being kept front of mind. Whilst I appreciate it isn’t as straightforward as I’m making it sound, I’m cheering them on as I know that this is a chance to lay out a new payment landscape where low-cost, real-time bank payments rival, if not better, cards.