Building upon the success of Open Banking in the UK

Imran Gulamhuseinwala OBE, Implementation Trustee for Open Banking Implementation Entity (OBIE), shares his thoughts on what the UK did right with Open Banking implementation and how it plans to build on this success

Open Banking has been a huge success in the UK, making it a world leader in the technology. A key component of its secure, successful implementation thus far, and its thriving, growing ecosystem has been the top-down approach that exists. As such, regulation and oversight have always been the watchwords for Britain’s Open Banking implementation, with the Competition and Markets Authority (CMA) establishing the Open Banking Implementation Entity (OBIE) to ensure its delivery. This has enabled unprecedented collaboration among banks, fintechs, regulators, alongside consumer and business representatives. Currently, there are 184 authorised third parties in various stages of enrolment into the ecosystem and on the journey to bring Open Banking enabled propositions to market. 

From our perspective, and that of the CMA, we are confident that Open Banking is going to continue to grow and deliver on its potential to rebalance the market in favour of the end user. As such, over the next two years, we expect more and more people to encounter this initiative as more third parties continue to bring new, exciting customer-driven Open Banking enabled propositions to market.

As part of the process to secure the future success of Open Banking, in May 2020, the CMA signed off on the final implementation stage for the programme. Under this roadmap, we will continue to work with the banks to improve the performance of Open Banking technology, thereby ensuring that users can access their data in a more timely and reliable fashion. We will also work to increase its functionality, especially around payments, by enhancing the standards to make it easier to pay and be paid. 

Accordingly, we are hugely supportive of the UK government’s recently announced Payments Landscape Review, particularly seeing how the transformative potential of Open Banking technology in payments was acknowledged. Furthermore, as part of the roadmap, we plan to build on the vital work we have carried out around user protection in payments. Our aim is to ensure that Open Banking users will not only continue to enjoy consistently simple, easy-to-use authentication experiences, but will naturally gain a better understanding (and therefore complete comfort and confidence) in how their data is used and shared. 

The logical next step for Open Banking is of course Open Finance, where users can access all their financial data, such as savings, mortgages, insurance and pensions, in a simple and secure way. This would allow them to see all their financial relationships in one place, leading to more personalised and therefore more beneficial life and purchasing decisions. 

However, it is vital that we build upon the lessons learnt from the rollout of Open Banking and utilise our existing learnings, assets, and capabilities, to realise the transformative potential of Open Finance. In this way, we can improve the existing infrastructure to make this first stage of transformative change possible. 

This includes learning from our experiences on how incumbents can control implementation costs; the need for central ecosystem support; as well as the benefits of common authentication mechanisms. Moreover, based on our own experiences over the last two years, we also believe that Open Banking can provide vital lessons for open finance by ensuring that a harmonised framework is constructed under a comprehensive and effective regulatory structure. Creating this single regulatory structure will be important in guaranteeing industry participation in a variety of sectors, just as the Open Banking mandate in the UK has unlocked the potential of data held by many incumbent banks. 

As is the case with Open Banking we also believe that open finance should make space for competition and innovation beyond the regulatory minimum. Open Banking enables the development of ‘premium APIs’, which are the products, services, and platforms which use Open Banking technology, but sit outside of its direct regulatory framework. These premium APIs, when fully developed, can crucially enable Open Finance by allowing data sharing practices to be effectively applied to a plethora of new sectors. 

The progress being made in the banking sector, as far as the early stages of Open Banking are concerned, has been palpable, and we continue to see that growth across the ecosystem with the development of new products, the launch of new providers, and the forging of new collaborative partnerships. While the process of implementing Open Banking in the UK is not yet complete, we are on the cusp of the next major development in the sector, where the market will genuinely work for everyday people and small businesses. Building on the success and learning from the lessons of Open Banking, Open Finance represents a future for user-driven financial services that we can all look forward to. 

The editorial was originally published in Global Open Banking Report 2020, which follows the journey from Open Banking to Open Finance and Open Data Economy and provides key insights about the benefits of Open Finance for different areas of financial service.

About Imran Gulamhuseinwala

Imran Gulamhuseinwala OBE is the Implementation Trustee for Open Banking Implementation Entity (OBIE). In his role, he has oversight and responsibility for Open Banking’s development and delivery of the common technical standards underpinning the Competition and Market Authority’s (CMA) Open Banking initiative. 

About OBIE

The Open Banking Implementation Entity was created by the UK’s Competition and Markets Authority to create software standards and industry guidelines that drive competition and innovation in UK retail banking.