The boss of the UK’s open banking body has called for the “spaghetti soup” of regulators overseeing the technology to be streamlined, as fintech firms increasingly push to accelerate its roll out.
Open banking, which was introduced in 2018 to free up data sharing in banking, has been touted by fintech firms as key to driving innovation in financial services.
The technology enables users to share bank and credit card transaction data with trusted third parties, as well as underpinning bank-to-bank payments, and total users passed five million last week.
But fintech firms have been pushing for adoption to be expedited.
Charlotte Crosswell, chair of the Open Banking Implementation Entity (OBIE), told City A.M. that simplifying the “spaghetti soup” of regulatory structures would be key.
“It’s not just about open banking now, it’s really becoming about where this technology sits and where its natural home is,” she said.
“We have got to work out who’s going to take it forward, and how many regulators are going to be involved and who’s going to set the policy going forward.”
The Treasury, Competition and Markets Authority, Payments Service Regulator and the OBIE all currently have a hand in its implementation, which Crosswell says has been necessary but now requires simplification
“That is how we will continue to make the UK a global thought leader in what comes beyond open banking.”
She argues that open banking is the first step in what will develop into a wider overhaul of the financial system in “open finance”, where firms can readily transfer data, with clients permission, and more easily integrate tools and services.
Open banking, Crosswell says, is just a fraction of the technology’s potential.
“It’s a bit like you have a fancy cooker which has a slow roaster oven, a steam oven, a grill. But at the moment we’re only using the oven to boil an egg,” she said.
The technology has been a source of contention in the fintech industry, with one of the country’s most prominent fintech voices, Anne Boden, boss of Starling Bank, last year telling MPs it had been a failure.
She branded open banking as a flop that is too “clunky” and fails to deliver benefits to consumers.
Fintech bosses hit back in December saying her comments were “uncompetitive and typical of banks trying to thwart the future of innovation in financial services”.
Fintech firms have doubled down on their push for open banking again this week as the industry prepares to mark a year on from the landmark Treasury-commissioned Kalifa Review of Fintech, which argued for a roll out of open banking into new areas of financial services.
A group of the country’s leading fintech bosses signed an open letter from industry body Innovate Finance on Monday calling on government and regulators to speed up regulatory reform in the sector and extend open banking.
Yapily, an open banking infrastructure builder and one of the signatories of the letter, told City A.M. more coordination was needed for it to reach its potential.
“To ensure open banking adoption continues to gain momentum, further collaboration between regulators, the Government, the CMA9 (the big banks in the UK overseeing open banking), and third party providers is needed,” Yapily boss Stefano Vaccino said.
“Each time the underlying policy or infrastructure is updated, more innovative use cases are unlocked.”
Open banking payments firm, Volt, said the technology was facilitating competition and allowing fintechs to challenge the incumbents.
“Cards have long-established a monopoly, so it was always going to take time to convince merchants and consumers of the benefits of open banking-based account-to-account payments,” Jordan Lawrence, chief commercial officer (CCO) at Volt, told City A.M.
“But as new statistics show, the message is now very much getting through.”