Thought Leadership

OBL Trustee responds to PSR’s Call for Views on the expansion of VRPs

15 February 2024
Thought leadership

This is a pivotal year for both open banking and Open Banking Limited (OBL). It will also be a year of change as we begin to move beyond the CMA Order to a sustainable commercial model, and expand open banking beyond the current regulatory baseline to unlock open banking’s full potential. As Trustee, I welcome the Payment System Regulator’s (PSR’s) ambition to pilot the first ecosystem-wide expansion of this nature.

The pilot to extend variable recurring payments (VRPs) is an essential first step to achieve this. This pilot will be essential in helping to develop the capabilities and expertise in the future entity that will support the new delivery model envisaged by JROC.

I fully support the PSR’s ambition to move us another step closer to unlocking the potential of account-to-account payments as an alternative to cards and the desire to do so at pace.

It is essential that the pilot is established so that we can learn from it and apply those learnings in the future so that it provides good foundations and a pathway to successfully expanding open banking in the future.

As open banking Trustee, I have set out a response to the call for views on the development of VRPs and the proposed pilot. This includes suggested modifications to the PSR’s proposed approach which I consider will improve the prospect of attaining the long-term objectives that both JROC and the industry want to achieve.

Marion King, OBL Chair and Trustee

Key points include:

  • Pricing: both JROC’s previous report of 17 April 2023 and the Future of Payments Review Report published in November 2023 (the Garner Report) were clear on the need to establish commercial models which create the right incentives for all parties. While the PSR’s proposal is pragmatic, it does not deliver the long-term strategic, sustainable solution that is needed to move open banking forward. By granting free access to TPPs, it creates market expectations that will be difficult to reverse in subsequent phases of the VRP roll-out or in future. The UK could learn valuable lessons from the pricing work that the European Payments Council is progressing with the SEPA Payment Account Access scheme as an alternative pricing model.
  • Moving beyond the CMA Order: for the purposes of the pilot, I support the PSR’s approach of mandating sending bank participation in the VRP pilot if voluntary participation cannot be achieved. I am concerned that the proposal to effectively extend the CMA Order requirements on the CMA9 banks is unnecessarily narrow and a missed opportunity not to use the VRP pilot to seek participation across a wider pool of firms that expands the ecosystem in a way that aligns to JROC’s objectives.
  • The future entity: JROC has been clear that it sees a vital role for the future entity in the development of open banking. The PSR is missing an opportunity to build on existing capabilities at OBL and ensure that these can evolve to respond to future needs. In the process, valuable learnings may be lost.
  • Multilateral agreements (MLAs): given the importance of MLAs in delivering a pathway to successfully expanding open banking, growth of the ecosystem and expanding the range of new products and services offered, it is essential that OBL and the future entity plays a key role in bringing the first MLA to market. The long-term future of open banking will be delivered through several MLAs, not just for payments functionality but for data as well.
  • Disputes management: It would also be expedient to leverage existing capabilities in OBL to efficiently and cost effectively progress the pilot at pace. OBL already has the foundations of the functionality in its technical support and monitoring functions which could effectively deliver an embryonic disputes management system. There is broad ecosystem consensus on the need for a robust disputes management process that extends beyond VRP to all open banking payments and also for data. Duplication could lead to inefficiencies and poor customer outcomes.

I am grateful that the PSR has consulted widely on this proposal and is building on the work of the industry-led VRP Working Group that delivered its report last year. It is essential that the follow-on activities deliver against JROC and industry aspirations for open banking.

I thank all those participants and stakeholders who have contributed their expertise and considered views to the consultation so far, and encourage you to continue to participate in this process. Your engagement and feedback are essential in influencing the future of open banking in the UK.

Download the document

Read my detailed response here.