Policy paper

Joint statement by HM Treasury, the CMA, the FCA and the PSR to update on the future of Open Banking

Published 16 December 2022

In March 2022, HM Treasury, the Competition and Markets Authority (CMA), the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) announced the creation of a new Joint Regulatory Oversight Committee (the Committee) and the Government and regulators’ commitment to build on the success of Open Banking. The key objectives of the Committee at present are developing the vision for the future of Open Banking and to make recommendations on the design of the future Open Banking entity (future entity). This statement updates on the work of the Committee, including emerging thinking, ahead of a further statement in Q1 2023 setting out the common authorities’ views and recommendations.

As set out in the March joint statement, the Committee expects Open Banking to transition from the current model, in which the OBIE is overseen by the CMA, to an interim state, in which a future entity will be overseen by the Committee (in respect of non-order activity) and by the CMA (in respect of the Order activity) prior to the establishment of a long-term regulatory framework for Open Banking. The interim state will begin once the CMA deems the current Roadmap to be complete. During the interim state we expect the OBIE, and subsequently the future entity once established, to fulfil both Order and non-Order activities, evolving and scaling its functions over time. The interim state will end when the long-term regulatory framework is in place. The framework will be underpinned by any necessary legislation.

The Vision

The Committee is determined to ensure that the benefits of Open Banking are fully realised and momentum is sustained. Open Banking has a continuing role in promoting greater competition and innovation for the benefit of consumers, businesses and the wider economy, as well as maintaining the UK’s international competitiveness and leadership in the field. This will enable new services that consumers and businesses value and trust, and which support sustainable economic growth. In some cases, this may need the support of regulatory intervention.

The Committee has identified three priorities to deliver this vision:

• Unlocking the potential of Open Banking payments to support competition and innovation by creating greater choice between payments methods and enabling exciting opportunities to build the next generation of payments, including more efficient and tailored services;
• Adopting a model that is scalable for future data sharing propositions; and
• Establishing a sustainable footing for the ongoing development of the Open Banking ecosystem.

The Strategic Working Group (SWG), convened by the Committee and independently chaired by Bryan Zhang, is providing extensive analysis, which reflects the range of stakeholder views on current gaps in Open Banking, potential short and long-term solutions, and the structures required to further develop Open Banking and define a future roadmap. The SWG final report, which will be submitted to the Committee by January 2023, will be a critical input to JROC’s thinking.

In the interim state, we expect the future entity to embark on delivering priority non-Order activities, supported by the regulators where appropriate.

The design of the future entity

The future entity will play a central role in developing and progressing the Committee’s vision.

We expect that the entity’s key responsibilities will include:

• Enabling the development of new Open Banking product and service propositions and support innovation and competition within the financial services sector which benefit consumers and businesses and support economic growth in the UK
• Providing and maintaining the technical infrastructure and critical services for Open Banking, as well as improving and developing existing and new technical standards
• Ensuring compatibility with the activities of other key actors in the ecosystem, e.g., Pay.UK in relation to Faster Payments scheme rules

To ensure the above, the Committee is finalising its proposals for the design of the entity. There are three fundamental components we are addressing through our work:

• The structure of the entity: A long-term regulatory framework for Open Banking needs to be established, including regulatory powers for the relevant regulator, which should put in place the necessary structure to allow for the CMA Order to be reviewed and varied or revoked (subject to the CMA’s decision).
• Prior to the establishment of the long-term regulatory framework, there will be an interim state whilst the CMA Order remains in place.
• The funding of the entity: In the long-term, the future entity’s funding and liability arrangements should be broad-based and equitable with the funding of the entity shared across all users in an efficient and proportionate way that reflects the level and structure of the underlying costs. Any potential charges and the liability arrangements that underpin services and capabilities should not disincentivise innovation or the take-up of services.
• In the interim state, where possible, we think this principle should apply to non-Order activities, including any new activities, services or infrastructure.
• The governance of the entity: The entity should be independent and underpinned by a set of values and cultures that include an emphasis on integrity and promoting ethical behaviours. The purpose of the entity, including playing a central role in the development and growth of Open Banking, should be reflected in its governance arrangements.
• It is our view that the governance arrangements can be put in place in the interim state.

Interaction with other open banking activities

Other important activities are being progressed in parallel to the Committee’s work, including the transition planning led by the OBIE and overseen by the CMA as well as the work led by HM Treasury to determine the necessary legislation to underpin the long-term regulatory framework for Open Banking. The Committee will continue to coordinate to ensure all activities align to achieve the vision set out above.

Next steps

• The CMA will announce the completion of the current roadmap shortly.
• The Committee will publicly set out its recommendations in relation to the design of the future entity, both during the interim state and once a long-term regulatory framework is in place, and the vision for Open Banking, in Q1 2023. We expect it to include a roadmap to deliver that vision and will continue to work with industry as we develop this.

Recommendations for the next phase of open banking in the UK.