Open banking regulator sets out next steps

Plans for ongoing evolution of the UK open banking sector have been set out by regulator in bid to grow the open banking sector in a ‘safe, scalable and economically sustainable way’

The Joint Regulatory Oversight Committee (JROC) has said set out its next steps, following recommendations made in April, to grow the open banking sector in a “safe, scalable and economically sustainable way”.

In April’s announcement, the JROC, which replaced the Open Banking Implementation Entity (OBIE) – set out key steps. It hopes to level up availability and performance, mitigate the risks of financial crime, and ensure effective consumer protection if something goes wrong.

It recommended improving information flows to third-party providers and end users, and promoting additional services with variable recurring payments (VRPs) to be used as a pilot. VRPs not only allow people to vary payment amounts, which direct debits already do, but enable them to cap how much is pushed out for any given payment and cap the total amount that is paid out over a certain period.

In the latest announcement, the JROC said it was setting up dedicated workstreams to meet these goals and would establish two new working groups by the end of this month: on variable recurring payments (VRP), where it will develop a blueprint for the phased roll-out of non-sweeping VRP by the end of September 2023; and a future open banking entity, to replace the Open Banking Implementation Entity.

“This work is crucial in realising the full potential of open banking in the UK,” said a joint statement from the Payments Service Regulator and the Financial Conduct Authority, the JROC s’ stakeholders. “Now that we have a roadmap in place to deliver on the next phase of open banking, it’s vital that we work collaboratively and at pace to progress the key priorities we identified.” 

According to a report from independent advocacy group the Coalition for a Digital Economy, more than 4,800 people work in open banking in the UK, and the industry raised over £886m last year.

In 2018, UK banks were required to implement the Competition and Markets Authority open banking regulations, which led to the development of application programming interfaces (APIs) in banking to give consumers more control over their accounts.

The end goal was to increase competition in a sector dominated by big financial services companies. Customer banking data is shared by the industry through APIs, with customer permission, enabling businesses to offer tailored products.

More than seven million people in the UK used open banking last year, marking five years since the competition regulator forced banks to introduce services. According to figures reported to Open Banking Limited (OBL) building societies, two million users were added in the past year.

The JROC said the OBL would lead and coordinate on levelling up availability and performance, mitigating the risks of financial crime, developing proposals for dispute processes and improving information flows to third-party providers and end users.

OBL will provide a monthly update to the JROC on this work.

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