Open finance

Open banking, open finance and Smart Data – Parliamentary panel update

28 April 2023

Earlier this week, OBL hosted a Parliamentary reception with regulators, MPs, civil servants and members of the open banking ecosystem, with a panel discussion on the future of open banking, open finance and Smart Data.

Following last week’s publication of the Joint Regulatory Oversight Committee’s Report on the future of open banking, and ahead of the inaugural meeting of the newly formed Smart Data Council, it was a timely opportunity to explore the next steps needed to build on the success of open banking in the UK and ensure it continues to deliver benefits to consumers and small businesses.

The panel comprised:

  • Matt Warman MP, Member of Parliament for Boston & Skegness; former minister for the Department for Digital, Culture, Media & Sport.
  • John Penrose MP, Member of Parliament for Weston-super-Mare; author of Power to the People 2021, an independent report on ways to improve consumer protection and promote competition.
  • Marion King, OBL Chair and Trustee.
  • Daniel Gordon, Senior Director of Markets, Competition and Markets Authority (CMA).
  • Chris Hemsley, Managing Director, Payment Systems Regulator (PSR).
  • Sheldon Mills, Executive Director, Consumers and Competition at the Financial Conduct Authority (FCA).
  • John Fitzpatrick – Head of Smart Data Team, Department for Business and Trade (DBT).

There is clearly a strong collective will to move the open banking industry forward, and as the CMA’s Daniel Gordon put it, to build the regulatory frameworks that will turn open banking into “open lots more things”.

We summarise some of the key themes, questions and aims discussed by the panel and participants below.

Key themes
As well as the need for regulatory frameworks, John Penrose MP highlighted the opportunities presented by the Data Protection and Digital Information Bill, which puts Smart Data at the heart of the digital economy.

He pointed out, however, that the Bill doesn’t place a duty on any of the ministers who will have new powers under this Bill, or tell investors or business leaders, which sectors are going to be opened up next, and in what order. He urged the Smart Data Council to put this at the top of their agenda, saying that people want “speed and certainty” about how this will work in practice.

John Fitzpatrick from the DBT agreed that there was a need to identify and work with other sectors that may potentially benefit from Smart Data – such as energy and water – and that his department is looking at which sectors are ready to go next, including carrying out pre-market engagement on this topic.

He also emphasised that there needs to be data interoperability between different sectors – including the possibility of a new [digital] sandbox – to navigate between them.

The DBT is also looking at opportunities beyond payments, and is working with the Treasury team in Australia to benefit from their insights and experience.

Independent consumer expert, Faith Reynolds, asked the panel how to get products to market at speed – such as sandboxes and business models – and several panellists and audience members were keen to explore how open banking could become commercially sustainable.

This included how commercial incentives may be needed to kick start market opening to encourage entrants and newcomers, how customers could be rewarded for sharing their data, and the importance of levelling up both the performance of data and data frameworks.

Many eyes are focused on variable recurring payments (VRPs) as a key commercial opportunity and a way to drive competition in financial services. Chris Hemsley said the PSR is conducting a pilot test on VRPs, and is looking to get that live quickly, adding that this would also provide an opportunity to learn what dispute resolution processes might be needed, to help launch the next generation of payments use cases.

Consumer trust was also high on the agenda, and panellists agreed that building consumer trust and understanding is a priority, including having a simple language about what open banking payments are, such as ‘customer-directed payments’.

Sheldon Mills said that building trust will take time, but that sharing data was not necessarily a big step once people have taken it, adding that switching needs to be easier in all markets, as well as getting the customer journey right.

Turning to the issue of fraud, Marion King pointed out that this is one of the major consumer concerns, saying that “the challenge we have is that we have put friction in [to the customer journey] because of fraud, so you’re protecting the customer but you’re also worrying them”. She also highlighted the need to address liability issues.

John Fitzpatrick added that there is an opportunity for the Smart Data Council to dig into this and explore how consumers interact with our world – a smooth customer journey and experience are key.

Opening up sectors to Smart Data
In closing the discussion, panellists were asked what sectors they would like to see opened up to the benefits of Smart Data. These were some of the suggestions:

  • Daniel Gordon – telecoms, energy, petrol prices, Facebook and other platforms
  • Matt Warman MP – supermarkets and mortgages
  • Sheldon Mills – tech firms, and central and local government
  • John Penrose MP – Amazon.

Adam Gagen, Global Head of Government Affairs at Revolut, who posed the question, suggested ‘big tech’ and the ‘fight against fraud’.

It was reassuring to have such an engaged and expert audience and to hear that the panel both reinforced JROC’s ambition for the future of open banking, and that the legislation for Smart Data is progressing well.

While there are still some thorny issues to crack, such as the funding and liability of any centralised services managing the transition to open finance or open data, it is clear there is no shortage of opportunities – and widespread support – for “open lots of things” as Smart Data prepares to take a leading role in powering a digital economy.