A city watchdog was strong-armed into action on open banking today after a group of top fintech firms accused it of stifling innovation and called for it to speed up its decision making.
The group of 26 firms, convened by fintech industry body Innovate Finance and the Coalition for a Digital Economy (Coadec), signed a letter claiming the Competition and Market Authority’s (CMA) was dragging its feet on defining and implementing a key element of open banking – variable recurring payments (VRP) for sweeping , the automatic transfer of money between a customer’s accounts.
The firms describe the mechanism as a “key part of the final stage of the open banking roadmap” and said that the lack of clarity left businesses in limbo.
“Currently, it is unclear which banks or providers need to build, and in the absence of a clear direction this means critical development and commercial negotiations will be paused,” the letter said.
After the letter was published the CMA pushed out a response clarifying the definition of VRP within two hours, but Innovate Finance and Coadec now say the definition does not go far enough.
“We are taking views from our ecosystem of fintech companies, but it is clear that the definition of VRP for sweeping is narrower than it could be,” they said in a joint statement.
“As a result, it will not lead to fintechs creating as many innovative products and services for consumers.”
Open banking was introduced to encourage innovation and boost competition in the financial services sector, and its roll out has been overseen by the CMA, Treasury and the Open Banking Implementation Entity (OBIE).
The letter from the fintech firms claimed that the OBIE had been “critical” to the rollout so far, but a lack of clarity from the CMA over its future was also casting uncertainty over the roll out of technology.
Innovate Finance and COADEC said that while the CMA had now responded to the letter, it had done nothing to settle concerns of the future of the OBIE.
The calls for action from the CMA come after the boss of the OBIE told City A.M. last month that a more streamlined regulatory structure would be key to open banking’s success.
Charlotte Crosswell said that a “spaghetti soup” of regulators needed simplifying and clear ownership of the technology needed to be defined.