The financial regulators in Britain said on April 17 that they would be setting up a new body in the coming two years so as to encourage more competition when it comes to banking services by way of using third-party apps from fintech firms.
Significantly, open banking refers to firms, the third-party ones, making use of banking data from customers at main lenders so as to offer customised services like payments or lending, which happens to be a sector that has helped Britain’s fintech segment become the third largest in the world with a total of 2,500 companies.
Open banking, which is as of now being used by around 7 million consumers as well as businesses, came into the picture due to an order from Britain’s competition and market authority almost five years ago in 2018, thereby requiring nine banks to share their data with companies outside if the customers give permission.
Regulators are now looking to move to the next stage when it comes to setting up a long-term body so as to help enhance the uptake when it comes to open banking and also widen it to other parts of the economy, thereby aiding London to flourish as a worldwide fintech centre post-Brexit and also helping in providing more company listings in order to compete with the EU as well as New York financial centres. According to the financial conduct authority and payment systems regulator, they will also work with open banking participants in the next few months so as to undertake more analysis of the options when it comes to structure, governance, as well as funding of the future entity. The statement further stated that although there has been significant progress, much more needs to be done to fully realise the benefits of open banking across the entire retail banking sector and even beyond.
Apparently, recommendations from regulators are going to keep up the momentum when it comes to open banking thereby extending its benefits to other segments, opined Marion King, who happens to be the chair of Open Banking Limited, which is into analysing if the nine banks are complying with the open banking regulations when it comes to customer data.
Following Brexit, Britain is keen on pushing open banking to the next level so as to attract more fintech companies to set up offices in the country, as the EU is all set to compete with its own open banking version.
As per Andrew Griffith, Britain’s financial services minister, it is indeed rare that legacy firms have the ability to innovate at the required pace to make the most of technology that keeps upgrading and also keep them globally competitive. The data protection draft law which is at present going through parliament will be used for open banking on a sustainable footing, he added.
The regulators opine that the UK fintech industry is successfully making use of open banking tech, however, industry officials have warned against any complacency by both the government and regulators. As per Griffith, this is going to be the year of next-generation delivery of open banking, and they won’t be resting on their laurels.
Notably, Britain’s fintech industry stands third in the world after the US and China, with investment in UK fintech amounting to $12.5 billion last year, as per Chris Hayward, the policy chief of the London Corporation, which takes care of its financial district. According to him, global competitiveness is the in thing now.