Fintech firms have called for open banking’s implementation body to be “weaponised” and simplified as the Competition and Markets Authority (CMA) prepares to deliver a verdict on its future next week.
Open banking was introduced in 2018 to free up data sharing and drive competition in finance, and the technology has been touted by fintechs as essential to driving innovation in the sector.
But the calls for clarity on the technology’s governance come after a group of 26 fintechs criticised the CMA on Monday for dithering on key decisions and failing to outline a role of the Open banking Implementation Entity (OBIE), despite holding a consultation on its future last March.
City A.M. understands the CMA is now set to deliver a verdict on the governance of open banking and the long term future of the OBIE next week.
Yapily, a leading open banking infrastructure builder which signed the letter to the CMA on Monday, told City A.M. yesterday that the OBIE would be key to the success of open banking.
“With the OBIE, we’ve had the most progressive and focused implementation entity in Europe to help open banking get off the ground,” said Iain McDougall, chief commercial officer.
“I think they’ve set the standard from a European basis in terms of what’s required to implement a new regime and an ecosystem like this.”
But he warned that a “mesh” of regulators overseeing open banking was beginning to frustrate its roll out.
“It’s time that we’ve had some clarity and some simplification, around the roles and the different kind of regulatory bodies and entities at play in this ecosystem,” he said.
The Treasury, CMA, OBIE, Payments System Regulator, CMA9 (the UK’s nine biggest banks) and the Financial Conduct Authority have all had a hand in the technology so far, and the boss of the OBIE Charlotte Crosswell told City A.M. last month that the “spaghetti soup” of regulators needed streamlining.
The boss of payments processing firm Crezco, another signatory of the letter on Monday, said the OBIE needed to be given teeth by regulators if open banking was to deliver to the standard expected by the industry.
“The original open banking payments still fail to meet their expected standards but not one banking service provider has been reprimanded. Why? Because the overseer, the OBIE, has been given no power,” said Ralph Rogge, founder at Crezco.
“Even if they wanted to do something, the harshest punishment they can prescribe is ‘feedback’. A sheriff needs a gun, not just a badge. Either weaponise the OBIE or hand over control to the CMA or the FCA.”
The OBIE has however been rocked by a number of bullying and harassment scandals internally, with ex-Innovate Finance boss Crosswell called in to clean up its reputation last year.
An investigation into the incidents found that the CMA and CMA9 had to shoulder their share of responsibility, and the the CMA said the findings would be taken into consideration when deciding on the future structure of open banking governance, alongside the consultation responses.
Adam Jackson, Director of policy at fintech industry body Innovate Finance, told City A.M. that uncertainty over the OBIE’s future was stalling innovation in fintech.
“We have to find an approach that both delivers further competition in the market and sorts out outstanding issues, and unleashes a new wave of innovation,” he told City A.M.
“Not least enabling products that could provide real benefits to hard pressed consumers and savers as we face a cost of living crisis.”
Jackson said Innovate Finance had expressed concerns to the CMA over its planned structure for open banking governance last April, on the grounds of competition and independence, innovation and sustainability.
Charlotte Crosswell, Chair and Trustee, OBIE, told City A.M. the progress on open banking had been strong so far and it was important for the industry to now push ahead.
“It is vital that we need to keep up the momentum, and we should not lose the expertise and knowledge we have built within the OBIE and wider ecosystem,” she said.
“We need to maintain the UK’s position as a leader, and leverage open banking assets, infrastructure and technology to help deliver open finance and drive growth in other sectors as smart data initiatives come online.”