Happy Sixth Birthday to Open Banking!

Open Banking celebrated six years young on the 15th of January, making this the perfect time to give the industry a JROC (Joint Regulatory Oversight Committee) update. 

As we look ahead in Open Banking, JROC has been our guiding North Star. The JROC committee, having commenced their ambitious work in June 2023, has already proven essential in helping us realise Open Banking’s full potential. From the Data Protection and Digital Information (DPDI) Bill to the Payment Systems Regulator (PSR) consultation paper for variable recurring payments (VRP), we celebrate the milestones of 2023 that will pave the way for Open Finance and smart data.

The stars truly aligned during our January Campfire when our carefully curated panel, hosted by Akila Quinto, financial services reporter for the Financial Times, gathered to reflect strategically on a supernova year. Industry and regulatory leaders, including Jane Moore (Head of the Department for Payments and Digital Assets at the FCA), Kate Fitzgerald (Head of Policy for Payment Systems Regulator), and Henk Van Hulle (CEO of Open Banking Implementation Entity), spoke about key industry initiatives that will shape the Open Banking sector. 

We were also joined by Open Finance experts, including Kat Cloud (Principal Director of Open Banking Compliance at Yodlee) and Stephen Wright (Head of Regulation and Standards at NatWest), who helped us gain crucial insight into the sustainability and scalability of our commercial model. As we reflect on our progress in 2023 and solidify our goals for Open Finance in 2024, it was a pleasure to hear from each member of this distinguished group. 

In achieving our mission of realising the full potential of Open Banking, all of our panel members agree- we must continue our collective commitment to driving innovation, fostering competition, and delivering enhanced financial services to consumers and businesses alike. While dedicating ourselves to a collective commitment may sound easy, delivering seamless growth outcomes for the Open Banking industry is easier said than done.

Safe, Sustainable, and Scalable

We opened our Campfire by having our panellists answer one simple question pertaining to the importance of Open Banking to the FCA. "I hope that, in the future, my children use Open Banking," Jane Moore said to reiterate the importance of Open Banking to the FCA and its potential to transform how all people manage their finances and make payments. As Jane began to dive deeper into the elements of Open Banking that make it the UK's success story, her message to our community quickly became clear- participating in the ecosystem we have built is vital to our community's future success.

With great power comes great responsibility; if we want to entrust Open Banking with the financial well-being of future generations, we must ensure we are doing everything we can to ensure that the central body of governance promotes an economically sustainable, equitably funded, and efficiently governed system.

How do we achieve our vision for Open Banking?

In paving the way for Open Banking, Joint Regulatory Oversight Committee (JROC) - led jointly by the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) – has proven vital in setting out its recommendations on the design of the future entity and the vision for Open Banking. 

As JROC continues leading our community forward, we heard from our panellists on the status of key JROC initiatives, including the Data Protection and Digital Information (DPDI) Bill, which we expect to pave the way for Open Finance and smart data, signifying a transformative shift. We also heard updates on the highly anticipated roadmap for Open Banking. This roadmap includes the development of the future entity and the phased rollout of Variable Recurring Payments (VRP), which is outlined as a top priority, promoting the ongoing collaborative efforts between industry and regulators. Additionally, the Payment Service Regulations review and the global activity in Open Banking, including the USA's collaboration with Oxford University and the UK Government, further underscore the momentum in the industry.

While we can see the potential for positive change, we must be aware of variable recurring payments and their impacts on consumers; this is not merely a constellation in isolation. In communicating the significance of these effects, we turn to the PSR.

Better Competition Leads to Better Outcomes for Consumers

"Competition is really at the heart of our strategy," Kate Fitzgerald explained, reflecting on the PSR's five-year strategy plan published two years ago. From a consumer perspective, it is easy to see where Kate derives her passion for Open Banking. By supplying consumers with access to payments of better price and quality, competition between Open Banking payment systems benefits both merchants and consumers by promoting a sustainable commercial model. The future of variable recurring payments is especially crucial in broader use cases, as demonstrated by the JROC PSR consultation published in December 2023. The VRP working group's blueprint and the JROC's published response to this blueprint were delivered last year, containing invaluable strategies for scaling VRP to ensure more consumers and businesses can benefit from flexible payment methods.

While we applaud the efforts of the VRP working group, there are a few areas where incentives need to align with the reality of the industry. In tackling industry thornes, including security and privacy concerns, Kate emphasised to our audience the need for a proof of concept of a wider VRP rollout, which would result in use cases focused on areas where there is already sectoral regulation to protect consumers from harm if things go wrong with a payment.

Six Years Young

While celebrating Open Banking's birthday in the UK, Henk Van Hulle made an important point- this industry is as old as it is young. Although we have faced regulatory hurdles and market challenges over the past year, we must also take a moment to highlight the successes of 2023, shining brighter than ever, that signify this sector's immense growth, including:

• One of every six SMEs uses open financing to deliver banking for one of every nine consumers. 

• Payments have grown by approximately 90% across the ecosystem. 

• More than 5,000 individuals work directly or indirectly in the Open Banking sector, contributing about 4 billion pounds to the UK's GDP.

Recognising these wins, Henk also acknowledged the need for more tangible outcomes as we continue into 2024, describing how we should strive to see more tangible outcomes (as opposed to theoretical plans) so that, within the next year, we can come together as industry leaders and regulators to begin engaging with and accessing data that falls outside the scope of Open Banking. In putting future regulatory frameworks in place, gaining greater clarity on the prioritisation of sectors, and solidifying a timeline for the rollout of innovations that facilitate access to smart data under a sustainable funding model, we will see the Open Banking industry continue to progress and have even more to celebrate at this time next year.

The Bottom Line: Innovation Requires Collective Commitment 

It is no secret that the market conditions for the Open Banking industry are challenging. From adhering to various regulatory standards and ensuring compliance with data protection laws to managing new types of risk to adopting different approaches when operating across borders, players in the Open Banking sector must overcome unprecedented barriers to reap the industry's fruitful rewards.

In navigating the ever changing market, we must remind ourselves of Open Banking's roots and that this revolutionary technology was, in fact, born in the UK more than six years ago. At OBE, we continue to derive strength by recognising that our progress in moving Open Banking forward has never been a sole operation; our advancements emanate from a collective and collaborative process across industry leaders and government regulators to facilitate bridging the public and private sectors. Collectively, we are an incredible galaxy.

Helen and the OBE Team