Following it 2019/2020 business plan commitments around developing its open finance strategy, the UK financial regulator the FCA has published a feedback statement setting out the responses it has received. Open finance refers to the extension of open banking-like data sharing to a wider range of financial products, such as savings, investments, pensions and insurance.
Since the introduction of PSD2 in January 2018 the FCA has registered or authorised over 139 new providers offering Account Information or Payment Initiation Services. The Financial Conduct Authority is the conduct regulator for nearly 60,000 financial services firms and financial markets in the UK.
According to the FCA, responses show that open finance could potentially offer significant benefits to consumers, including increased competition, improved advice and improved access to a wider and more innovative range of financial products and services. It would also create or increase risks and raise new questions of data ethics. The FCA states that appropriate regulation will be essential to managing those risks and giving consumers the confidence to use open finance services.
Key highlights from the feedback statement include:
- Respondents generally agreed that open banking has developed significantly. There have been high levels of interest from technology firms, incumbents and innovators in and outside the UK.
- Respondents highlighted that the requirement to apply SCA every 90 days is burdensome for customers, creating friction for users, and hindering uptake of open banking services. Various respondents asked the FCA to change the 90-day re-authentication requirement.
- Many respondents agreed that the full benefits of open banking are not likely to be realised for another few years. Many, particularly from the banking sector, thought the FCA should allow for a period of stability where both ASPSPs and TPPs can develop customer-focused propositions based on existing functionality.
- Some respondents said that the Treasury should amend the Money Laundering and Terrorist Financing (Amendment) regulations 2019 to remove account information services providers (AISPs) and payment initiation services providers (PISP) from its scope, as soon as the opportunity arises
- Respondents felt that the biggest single barrier to customer uptake was consumer sentiment and awareness. Two Which? surveys in 2019 found that only 25% of people had heard of open banking and those that had saw a lack of perceived benefits and concerns about data security and privacy as barriers to consumer engagement.