UK’s FCA Charts Path From Open Banking to ‘Open Finance’

Open banking’s roots lie with the United Kingdom, where PSD2, a decade ago, gave a tailwind to banks’ “opening” their data to third-party providers.

As noted in a PYMNTS interview with Marion King, chairperson and trustee of the U.K.’s Open Banking Ltd. regulatory and advocacy group, the shift toward new services and financial products tied to that data sharing has hit the 10 million user mark, at 15% of the U.K.’s population.

“It’s a very good number,” King said. “We’re seeing really strong double-digit growth. And I think this is just the beginning, because you need to remember that this is only measured from the nine banks that were involved in the Competition and Market Authority’s initial open banking effort — so it could actually be higher.

“So double-digit growth month on month is very positive, and I think it shows pent-up demand for secure data exchange as we move forward with all of this.”

In recent weeks and months, there have been moves by regulators to cement these trends, and to offer a “National Payments Vision” that translates into further innovation in payments and financial services, and of course, digital channels across which innovations are delivered.

As noted by PYMNTS in November, the Bank of England, the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA) and the Payment Systems Regulator (PSR) said that they would revise their agreements on collaborative efforts to be more “in line with the government’s National Payments Vision (NPV).”  The National Payments Vision was published that month. The NPV seeks to upgrade the U.K.’s payments infrastructure and expand payments choice for consumers and businesses.

In a sign of that enthusiasm for digital payments, PYMNTS Intelligence has estimated that, in one example, peer-to-peer (P2P) transactions via digital wallets have gained traction. Data shows that 42% of U.K. consumers use digital wallets to pay merchants online.

More recently, as detailed here on Wednesday (Jan. 22), the FCA may remove the £100 (about $123) contactless limit and “set new digital service standards” as part of its efforts to support the government’s growth mission.

Variable Recurring Payments

An FCA letter sent last week to Prime Minister Keir Starmer, states that, in tandem with the PSR, and alongside the NPV, the authority is eyeing the debut of variable recurring payments. And as noted here in August, regulators had been examining the development and use cases for those payments, which as part of open banking, would be enabled as customers connect authorized payment providers to their bank account to make payments on their behalf “in line with agreed limits.”

The U.K.’s Competition and Markets Authority has approved nine British banks — known as the CMA9 — to implement a VRP open banking API to allow for an easier sweeping of funds from a customer’s current account to another of their accounts.

Additionally, per the letter earlier this month, the FCA contended that regulators could “use powers anticipated under the Data (Use and Access) Bill to develop open finance, potentially prioritizing SME lending,” and stated letter in the missive that “we could go even further and, with Government support, reduce costs of anti-money laundering measures, relaxing know your customer requirements on small transactions. The Treasury also commenced modernization of the Consumer Credit Act in 2022. If accelerated, we could reduce burdens further and faster.”