The Future Development of Open Banking in the UK

Bryan Zhang (CCAF), Alan Ainsworth (SWG Secretariat), Richard Mould (SWG Secretariat), Richard Koch (SWG Secretariat), Daniel Jenkinson (SWG Secretariat), Deborah Horton (SWG Secretariat), Shannon Kingston (SWG Secretariat), Simon Marsh (SWG Secretariat) and Matthew Wallace (SWG Secretariat).

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In August 2022, Bryan Zhang, the Executive Director and a Co-Founder of the Cambridge Centre for Alternative Finance at the University of Cambridge Judge Business School, was appointed by the Joint Regulatory Oversight Committee (consisting of FCA, PSR, CMA and HM Treasury) as the Independent Chair of an Open Banking Strategic Working Group (SWG). This report, entitled “The Future Development of Open Banking in the UK” is based on evidence collected and views collated during the SWG process which was ran from September to November 2022.

In total, the SWG Secretariat received 189 written submissions from 104 organisations during two rounds of open banking strategy sprints. The first half of the report focuses on gap analysis, which aims to understand key gaps between the current state of open banking in the UK and a more optimal state in the future. It also analyses how various stakeholders perceived these gaps and examines possible drivers underpinning their perceptions. The second half of the report focuses on exploring a diverse range of potential solutions, both in the short-term and in the long-term, that could bridge those gaps, ‘level up’ the ecosystem and make it ‘fit-for-purpose’, including a discussion on the future industry structure for the UK open banking ecosystem.

Highlights from the report

More than 6.5 million consumers and small and medium enterprises (SMEs) in the UK already use open banking-enabled products and services, contributing to UK leadership in the fintech sector, with UK citizens and businesses benefiting from increased competition, choice and innovation.

Last year HMRC stated that their adoption of open banking had saved the public purse over £500,000 in bank fees with more than £10.5 billion tax collected to date through open banking payments, demonstrating the efficiencies this new capability can deliver. In January 2023 the CMA announced that the six largest banking providers had implemented all the requirements of the Open Banking Roadmap. In order to build on this success, the Government and regulators set up the Joint Regulatory Oversight Committee (“the Committee”) to take forward the development of open banking beyond the CMA Order.

The co-chairs of the Committee, the FCA and the PSR, convened a Strategic Working Group (SWG) to collect empirical evidence and collate views from industry and other stakeholders to input to the future development of open banking in the United Kingdom.

The SWG created an open banking strategic sprint process to address questions set by the Committee under three priority areas:

  • Payments Strategy Sprint: Unlocking the potential of open banking payments
  • Data Strategy Sprint: Promoting further data sharing in an open banking framework
  • Ecosystem Strategy Sprint: Ensuring a sustainable open banking ecosystem.

The process elicited a broad base of evidence and opinions about the future of open banking and ways to best deliver that future. In total, over the course of two rounds of strategy sprints conducted from September to November 2022, the SWG Secretariat received 189 written submissions from open banking industry stakeholders, end-user representatives and independent subject matter experts.

The first round of strategy sprints identified five main gaps between the current state and what many respondents suggested was a more optimal future state for the UK open banking ecosystem. The second round of sprints focused on identifying a range of possible solutions, both short-term and long-term, that could bridge these gaps to unlock the potential of open banking payments, further data sharing propositions and build a more sustainable open banking ecosystem.

It was evident throughout the SWG process that key stakeholders of the open banking ecosystem share a desire for open banking to work well for consumers and businesses, enabling them to take advantage of new ways to manage their finances and have more options for payments in a safe environment.

However, despite this common desire it is evident that stakeholders have considerably different views when it comes to the detail of how to achieve this. It is also clear that many stakeholders have differing visions for the future of open banking and varied views on the forward-looking agenda, including on the structure and funding of a Future Entity (or entities). This report aims to reflect divergent views on key issues and identify areas of potential or emerging alignment. It provides empirical evidence to assist the Committee in considering and making decisions that will shape the future of open banking in the UK.