The FCA has published its latest thinking on Open Finance, taking account of feedback received in response to the Call for Input issued in December last year. The 40-page document responds in detail to some of the key concerns raised, and suggestions made, in 169 feedback submissions.
The FCA takes the view that Open Finance will build on the progress made with Open Banking, allowing consumers and SMEs to access and share their data with third party providers. The expectation is that this will enable third party providers to develop innovative products and services tailored to customers’ evolving needs.
The regulator believes Open Finance has the potential to encourage competition, provide significant benefits to consumers, and help tackle some long-standing harms, but says these benefits will only materialise if firms offer compelling services which are then taken up by consumers who could benefit from them.
The FCA insists that any Open Finance system design must take account of the risks and data ethics concerns it inevitably raises. Regulation, it says, unsurprisingly, has an essential role to play in managing these risks and giving customers the confidence to make use of Open Finance services. For Open Finance to develop fully, the FCA’s feedback statement notes, legislation will be required to establish any statutory right to data access and underpin a regulatory framework.
Although the statement acknowledges that commercial incentives do exist for open-finance type arrangements to emerge between firms – something that is already happening – their scope will inevitably be partial, limiting the potential benefits. Open Finance will not flourish unless firms have sufficient commercial incentive to invest and participate on a sustainable, and probably reciprocal, basis.
The FCA suggests that Open Finance should be implemented in a proportionate phased manner, ideally driven by consideration of credible consumer propositions and use-cases. Extending Open Banking to cover non-payment accounts and other banking products could be a relatively straightforward first step. Other necessary building blocks for a sustainable Open Finance ecosystem to develop, the statement argues, would include consumer protections informed by an ethical framework, an accepted liability model, common standards for APIs and user experience, and a digital identity – as well as an equitably funded and governed implementation entity.
The FCA confirms it will be supporting the Government as it considers the timing, scope and nature of required legislation on Open Finance. In particular, it will share lessons from the implementation and supervision of Open Banking and the development of Pensions Dashboards, work with government and industry stakeholders to identify appropriate industry roadmaps, help convene industry-led efforts to develop common standards, assess a workable regulatory framework, and support discussions on the future operating model for the Open Banking Implementation Entity (OBIE).
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