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Summary

A new report on Open Banking by the Coalition for a Digital Economy reports that UK Open Banking is at a crossroads.

The multi-billion pound sector could be poised to take flight beyond payment account data to open a new frontier of innovation and competition. Alternatively, the darling of the UK fintech ecosystem could stagnate and fall short of its promise, with the best and brightest firms forced to dial-back their (and their investors’) expectations or up-sticks and head across the Channel.

The report stresses the urgency of the moment by quantifying the value of the UK’s open banking ecosystem, and hence what is at stake. It notes that consumer data is disparate and fiercely guarded by incumbents ‘like dragons hoarding treasure in caves’. Large incumbents have no incentive to be proactive about enabling consumers to share their data in real-time. The Right to Data Portability under Article 20 of GDPR stipulates that firms have up to 30 days to present data in a machine-readable format. An excel spreadsheet 30 days after initiation is no use to anyone, while current technology can enable this exchange securely in real-time.

Open Banking was introduced in the UK through two actions:

• The Retail Banking Competition Order 2017 is an intervention by the Competition and Markets Authority that aims to inject competition into the retail banking sector by compelling the nine biggest banking groups to make it easier for account holders to ‘port’ their data and make account-to-account payments. This is now approaching completion. The JROC, responsible for designing the future governance of the Order, is due to publish its recommendations for the next stage of Open Banking in Q1 2023.
• The Payments Services Regulations 2017 is the UK’s transposition of the EU’s Second Payment Services Directive (PSD2). Regulating payments service is now fully the responsibility of the UK government, post-Brexit, with the Treasury currently reviewing PSRs and an initial consultation recently concluded.

Frequently cited as the global leader, the UK has sprinted ahead, but it might be fair to say that it is now beginning to flag, with other markets, who started later and at a gentler pace, beginning to catch up.

All this could change, however, as a result of Smart Data legislation. In the Data Protection and Digital Information Bill (DPDI), the UK government plans to introduce primary legislation to give secretaries of state the ability to mandate sector-specific smart data schemes through secondary legislation.

Links:  https://www.paymentscardsandmobile.com/uk-open-banking-market-at-crossroads/