17 Apr 2023

The next phase of Open Banking – roadmap for delivering the Future Entity

Today (17 April), HM Treasury has published the much-anticipated recommendations for the next phase of open banking in the UK by setting out the roadmap for the work of the Joint Regulation Oversight Committee (JROC).

This group is co-chaired by the Financial Conduct Authority (FCA) and Payment Systems Regulator (PSR) with HM Treasury (HMT) and the Competition and Markets Authority (CMA) as the other members. It’s aim is to:

oversee the planning and preparation for the future open banking entity (future entity)
oversee the transition to the future framework
consider the vision and strategic roadmap for further developing open banking
oversee and, where applicable, monitor the future entity, once set up, until a permanent regulatory framework is in place

The vision that is set out in the report is for a new phase to Open Banking – one offering more products and services with three priorities to deliver the vision, namely:

to establish a sustainable and competitive footing for the ongoing development of the open banking ecosystem so that it can grow beyond the current functionalities and bring further benefits to end users
to unlock the potential for open banking payments
to adopt a model that is scalable for future data-sharing propositions

The roadmap contains 29 actions in this report set which will be delivered over a period of two years. This can be found from page 7 of the report.

How success will be measured

The vision will be deemed to have been fully delivered when the government establishes the long-term regulatory framework for open banking. Success will be measured through the following ways:
greater innovation, lower prices or costs and improved quality of services
growth of the ecosystem (including the number of products and services offered)
the increased use of and reliance on open banking by consumers and businesses
the development, functioning and take-up of a commercial framework
a significant increase of total number of active users
the overall growing investment in open banking
number of incidents and issues, the way in which those are resolved, and the scale of any resulting consumer loss
stakeholders’ ongoing commitment and the delivery of the actions in the report; and
the testing and piloting of a commercial model for open banking and the establishment of the future open banking entity.

HMT expect the transition to the future entity to start later this year, however, they will not wait until the future entity is in place to undertake some of the activities not covered by the CMA’s Retail Banking Order such as improving data collection for financial crime and API availability.

HMT will shortly finalise the detailed view on the design of the future entity and the OBIE’s transition to it and they expect this analysis to be completed by Q3 2023. The government intends to create a smart data scheme under Part 3 of the Data Protection and Digital Identity (DPDI) Bill, which is returning shortly to Parliament.

In addition to delivering the future entity, they have identified five themes that will also be progressed in the next two years through this work:

levelling up availability and performance
mitigating the risks of financial crime
ensuring effective consumer protection if something goes wrong
improving information flows to TPPs and end users
promoting additional services, using non-sweeping variable recurring payments (VRP) as a pilot

While significant progress has been made, more needs to be done to deliver the full benefits of open banking within retail banking markets, and beyond, and maintain its international leadership.

Summary

The sector has been waiting over a year for this roadmap to be published and now we have visibility of the plan and some of the timescales involved, we are encouraged. Having a vision and a route to achieve it allows firms to plan and gives much-needed certainty.

However, some questions remain about how interdependencies identified will be actioned, such as digital identity, Smart Data and Open Finance – and there are no timescales offered for their implementation. In an increasingly connected ecosystem, this will be an important next step which ensures we remain as a world-leader in the space.

techUK and it’s members are engaged with key policymakers on these topics and have a lot to offer given our strengths not only in Financial Services, but also through our Digital ID and Data Policy programmes. We look forward to helping make these plans become a reality.

Andy Thornley

Head of Financial Services, techUK

Ella Gago-Brookes

Team Assistant, Markets, techUK

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