UK Seeks Guidance on New Open Banking Roadmap, Regulator

Last week, on June 24, the U.K. Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) issued two different statements about the future of open banking and the role that the Joint Regulatory Oversight Committee will play in this endeavor. Interestingly, both regulators called on stakeholders, including the private sector, to join a strategic working group (SWG) that will assist the Joint Committee in designing the regulatory roadmap for open banking and account-to-account payments.

The overarching goal of the Joint Committee is to support the continued growth of open banking in the U.K. The Joint Committee, which is formed by the FCA, the PSR, the Competition and Markets Authority (CMA) and the Treasury will take part in the design of a new regulator — and in the transition process from the soon-to-be-extinct Open Banking Implementation Entity (OBIE) to the new entity. The Committee will also monitor the future entity until a permanent regulatory framework is in place.

The Committee held a meeting on June 14 where its members discussed the setup of a non-decision-making SWG which will facilitate the committee’s engagement with the industry and stakeholders, and it will help in designing the new regulator and the strategic priorities. The SWG will be independently chaired, and the potential candidates to be part of this group will include experts from the private sector, the academia, trade associations and public officials.

The first meeting of the SWG is expected to be held in July, and the Committee may receive the first comments on the strategic priorities and deliverables from the group as early as the third quarter. With that input, the Joint Committee could draw up proposals for the design of the future entity by the end of the year, according to the terms of reference published by the FCA.

Read more: UK to Boost Open Banking With New Regulator

The same day, the interim head of policy at PSR, Kate Fitzgerald, published a statement detailing some of the reasons why account-to-account payments or instant payments haven’t grown in the country as much as other card-enabled open banking solutions. She outlined four issues that need to be addressed to promote account-to-account retail transactions using open banking:

The system’s functional capability: Regulators want to look at the different retail uses to find if the current functionality works for users and, if not, how issues or gaps could be overcome.

Dispute processes: The parties involved in a transaction need to act together to minimize risks like unsatisfactory goods being delivered after the payment or the retailer not acting in good faith, and it is necessary to have the right processes in place to ensure disputes are resolved efficiently.

Access and reliability: Retailers and consumers must be able to use their preferred payment method when they want to, and the system should work properly for the end-to-end journey for a retail transaction.

A sustainable funding model: For account-to-account payments to work in retail, the system needs to have a commercial and pricing model that ensures all parties receive sufficient compensation for the services they provide. The PSR wants to investigate how these payments can provide an opportunity for all parties, including account providers, to receive compensation.

In the same way as the FCA, Fitzgerald encouraged relevant stakeholders to join the SWG to be set up by the Joint Committee to advise it on establishing a vision and roadmap for the future of open banking and how to overcome these hurdles in account-to-account payments.

If everything goes according to the regulators’ plan, the transition from the OBIE to the new entity could be completed by the end of the year or beginning of 2023.