UK committee sets out recommendations for next phase of open banking

The Joint Regulatory Oversight Committee (JROC), comprising the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) as co-chairs and the HM Treasury and the Competition and Markets Authority (CMA) as members, published its recommendations for the next phase of open banking in the UK.

In the UK, over 7 million consumers and businesses (of which 750,000 are small to medium-sized enterprises or SMEs) are using innovative open-banking-enabled products and services to manage their money and to make payments. The JROC report sets out views, recommendations, and the joint actions required to successfully transition to the next phase of open banking and maintain the international leadership of UK. To deliver on its vision, JROC introduced a roadmap that sets out a three-phased delivery approach, through which open banking can continue to evolve and grow in a sustainable way within the next two years, ahead of the long-term regulatory framework being established. The report contains a roadmap of priorities over the next two years, covering five key themes:

• Leveling up availability and performance
• Mitigating risks of financial crime
• Ensuring effective consumer protection
• Improving information flows to third-party providers and end-users
• Promoting additional services, using non-sweeping variable recurring payments (VRP) as a pilot
   

These five themes are underpinned by 29 actions outlined in the roadmap. UK will deliver on these via a three-phased approach, which would commence in 2023 and end in 2025:

• In 2023, the focus will be on collectively improving visibility and understanding around the level of financial crime across the open banking ecosystem and the availability and performance of application programming interfaces (APIs) across different Account Servicing Payment Service Providers (ASPSPs). Focus is also improving the functioning of the open banking ecosystem—for instance, by ensuring consistent error messaging—and enabling better understanding of consumer concerns and possible future developments through consumer research.
• Next year, the aim is to lay the groundwork for the end state by improving data-sharing to prevent fraud and financial crime, supporting the development of commercial and liability frameworks and improvements in information flows to third-party providers on API calls and payment messages.
• The following year a sustainable commercial model is expected to have been developed and piloted, with the new innovative business models having been tested. Some of these actions may require the long-term regulatory framework and/or other regulatory intervention.
   

The report also outlines principles for establishing a long-term regulatory framework for open banking, which the government is intending to legislate for. The long-term regulatory framework will set out the role of the Treasury and the respective roles that FCA and PSR will have in providing oversight across the open banking ecosystem, including over the future entity. It will also set out the roles and obligations that firms and the future entity will play and have within the ecosystem. Going forward, JROC plans to measure success through stakeholders’ ongoing commitment and delivery of the actions in this report, including the development, testing, and piloting of a commercial model for open banking and the establishment of the future open banking entity. The plan is to implement a multilateral agreement or rulebook for premium application programming interfaces or APIs by the fourth quarter of 2025. JROC will monitor progress against all activities in the roadmap and will publish a progress report in the fourth quarter of 2023. Also, in the fourth quarter of 2023, JROC will set out a detailed plan for the future entity and the Open Banking Implementation Entity (OBIE) transition to it.  

Related links:

• Press release
• Recommendations for next phase of open banking (PDF)
• Agencies welcome recommendations