School’s out! Open Banking gets an A* report but there’s more work to do next term

2023 will go down as a big year for the UK’s open economy. We’ve seen the reinvigoration of Open Banking through the timely Joint Regulatory Oversight Committee (JROC) report, coupled with progress on reforming the credit information market and the Data Protection and Digital Information Bill that ultimately paves the way for Open Finance.

At the start of the year, it was announced the UK had reached 7 million Open Banking users, and I think it’s important we sometimes take a step back and celebrate this success. Yes, there’s more to do, but we should be incredibly proud because everyone looks to the UK for leadership and direction. Britain was the birthplace of Open Banking, and we’ve successfully exported it to other markets around the world.

With this in mind, we reconvened our community at the striking Salesforce Tower for a Campfire in the Clouds, which marked our accomplishments but also considered how we can continue to stay ahead of the curve.  

Expertly hosted by Lord Chris Holmes, a passionate and tireless advocate for the power of Open Banking to do good, the event saw our panel engage with an audience that encompassed the whole ecosystem - including regulators, banks, and third party providers - to look back at what we’ve achieved and to look forward to next term to get a sense of what else this year has in store.

Celebrating a job well done

“We’ve come a long way,” said Sheldon Mills, Executive Director, FCA. “We’re a country where  people don’t even have ID cards, so for them to be willing to open up their data is massive. It’s growing, and it’s not just individuals – there are around 750,000 small businesses using it.

“Open Banking can have a huge impact. Millions of people don’t have anything and struggle to save, so let’s start there. It can help them make healthier financial choices, think about how they budget, and give them the tools they need to build the financial resilience this economy desperately needs.”

Opening up data helps financial institutions to better serve the traditionally underserved, which is a point this was repeatedly touched on during the Campfire. “The biggest win is to show us all how we can reach more people in a more commercially savvy way,” explained Samantha Seaton, CEO, Moneyhub. “It doesn’t matter if you do lending, saving, or insurance, Open Banking technology has helped all those businesses to use scale to reach an entire mass market they couldn’t service before in a profitable manner.”

Our panelists considered how the UK has helped to inform other markets moving ahead with Open Finance, such as Brazil, with its tight, centralised model, Australia’s data-sharing economy, and India, which started with digital identity.

“All these models are starting from a different place, and making different decisions as they progress,” said Marion King, Chair and Trustee, Open Banking Ltd. “But isn’t that great – because we can learn from each other? Organisations like OBE are working globally, bringing that information together in a safe place where we can talk about it, and I think that’s incredibly valuable.”

Areas for improvement

As with any school report, there’s a need to keep pushing forward to address any gaps and ensure we don’t lose momentum.

“We need to create the right regulatory framework,” said King. “Then we can move into a sustainable, Open Finance ecosystem that works for all – because there are still some big gaps. The right programmes of work have been identified in the JROC report, and we now need to press ahead. For example, we need to make sure our APIs work and do the things we want them to do. There’s an opportunity for what we call premium APIs, and how different business models can evolve from that.”

Commercial viability and setting the right pricing model were front of mind for our panel. “We’re working together with industry participants on variable recurring payments (VRP), and the aim is to provide some commercial impetus into Open Banking and to allow for there to be something to bite on as we move forward,” added Mills. “Ultimately, we need to turn Open Banking into more of a profit opportunity, and that is at the heart of what JROC needs to do.”

“It makes things harder if the commercial incentive model is unclear,” agreed Paul Stoddart, President, GoCardless. “So I’m really pleased to hear it’s on everybody’s mind. There has to be an appropriate model that incentivizes businesses to invest in developing products and services for the benefit of all of us. There’s a genuinely good level of collaboration, and a good level of agreement about what we need to do. The rubber will really hit the road when the commercial model becomes clear.”

Driving interoperability

There were a number of questions from our lively audience. One that really resonated with me was around interoperability. I’ve just come back from Latin America, and there were nine countries talking about that hot topic.

“For me, it links to the ask that underpins Open Finance,” explained Mills. “The Smart Data Council, for example, needs to set up not just an enabling framework, but also needs to help think about what the standards and frameworks will be consistently. That will aid interoperability between one part of financial services and another, but also interoperability across all aspects of the economy. If we can fix that in the UK, it really is a good standard to show internationally.”

“We have about 80,000 merchants, and many aren’t convinced that Open Banking works properly,” added Stoddart. “Despite the great things that are happening around customer experience, that’s what they believe – and so we’ve still got a bit of a job convincing them that it does work and that we’ve got something worth operating with. Better standards will help with that.”

If we can nail interoperability together, that will cement our position as an A* student and help us to continue to lead the way globally.