The Competition and Markets Authority (CMA) retail banking market investigation concluded that older and larger banks do not have to compete hard enough for customers’ business, and smaller and newer banks find it difficult to grow. This means that many people are paying more than they should for their banking activities and are not benefiting from new services.
To tackle these problems, the CMA is implementing a wide-reaching package of reforms. One of the remedies is Open Banking. Open Banking enables personal customers and small businesses to share their data securely with other banks and with third parties, allowing them to compare products on the basis of their own requirements and to manage their accounts without having to use their bank.
To deliver Open Banking, a new organisation was created and is working with the nine Banks mandated by the CMA (Allied Irish Bank, Bank of Ireland, Barclays, Danske, HSBC, Lloyds Banking Group, Nationwide, RBS Group, Santander), as well as Challenger Banks, Fintechs, Third Parties, Consumer Groups and other parties to define and develop the required Application Programme Interfaces (APIs), security and messaging standards that underpin Open Banking.
When the benefits are being rolled out
The Open Banking delivery is split between March 2017 and January 2018, with March 2017 being focused on Open Data, making available information on ATMs, Branches, Personal Current Accounts, Business Current Accounts (for SMEs) & SME Unsecured Lending and Commercial Credit Cards. January 2018 is aligned to the upcoming European Regulation (Payment Services Directive 2), where authorised third parties can be given consent by the account holder to access their Bank accounts to extract statement information and to initiate payments, without having to use the Banks Online services. It is envisaged that this capability will then lead to far reaching innovative services being created by new entrants and technology companies.
Trust and Transparency
Open Banking will build APIs and standards on a ‘security first’ basis and put the trust of the customer at the heart of its planning and production. This will extend to creating, alongside UK regulators, security mechanisms and governance structures for organisations accessing and using a customer’s accounts.
The other CMA remedies will require the banks to publish trustworthy and objective information on quality of service, so that customers can see how their own bank performs and to send out suitable periodic and event-based ‘prompts’. Examples of these include the closure of a local branch or an increase in charges, to remind their customers to review whether they are getting the best value and switch banks if not.