Concerns Over Market Presence of Open Banking Future Entity
The future oversight of open banking in the UK is currently under discussion, but experts are conscious of the need for the “future entity” to walk the line between playing an outsized role and becoming just a talking shop for policy.
The Competition and Markets Authority (CMA) is currently consulting on the shape of the body to replace the Open Banking Implementation Entity (OBIE), following the expected completion of the Open Banking Order at the end of 2021.
Although some aspects of the order are still to be achieved before that time — including recurring payments, sweeping payments, and a standard for directory services — those involved are already looking ahead to how the OBlE’s replacement can further develop open banking and beyond.
“Over the last three years, we have made significant progress developing a world-leading infrastructure, and as the final pieces are falling into place, we recognise that work needs to be done to ensure the open banking framework is correctly structured beyond the implementation itself," lmran Gulamhuseinwala, implementation trustee for the OBIE, told VIXIO.
“This is particularly key for the evolution of Open Finance and Open Data."
Among the issues which the future entity will need to address is ensuring that it enables competition in the sector rather than using its privileged position to dominate certain segments.
“One of the things we’ve been quite vocal about is that when OBIE moves from being a Special Purpose Vehicle into something different, how can we ensure that a level playing field is then created?" Brendan Jones, chief operating officer at Konsentus, told VIXIO.
He pointed to the fact that the future entity’s funding by the CMA9 — the nine largest banking groups in the UK, to which the original Open Banking Order applied — places it largely beyond commercial concerns and so it could seize a “lion’s share" of the market in ancillary open banking services.
The CMA’s proposed plan for the future entity includes the provision of “around 30" service capabilities, including a directory service and a dispute management system.
“I would like to see the OBIE being that central body for the development of specifications into the industry, development and management of those specifications to ensure their relevance,”
Jones said, noting that this was where the UK had an advantage over the competing standards with which firms in Europe had to deal.
One of the issues to be borne in mind is that the OBIE is in fact two bodies: the Implementation Trustee, which is responsible for ensuring that the CMA9 follow the original order; and the broader OBIE which carries out the work around standards and other services.
The future entity will continue the latter work, but the CMA has still proposed that a level of commitment might be required from the CMA9, asking whether “the assumed ability of one or more of the CMA9 to withdraw from the Future Entity [is] a cause for concern in terms of the sustainability of these arrangements", and suggesting that they could be obliged to participate.
Ed Adshead-Grant, general manager and director of payments at Bottomline Technologies, said that the work of the future entity should not be set in stone at this early stage.
“The key for me is for it not to be too rigid," he told VIXIO.
“It needs the ability to adapt as a future organisation. Maintain the resilience, the API standards, the performance, but I hope there’s plenty of space in its powers to innovate and enhance."
It is not yet known what role the future entity will play when it comes to monitoring the progress of the CMA9. Currently, the OBIE collects data from the CMA9, which is then assessed by the monitoring function within the entity which then, in turn, reports to the Implementation Trustee. If any of the banks are falling short, the monitoring function recommends action to the trustee.
But there is a question as to whether an industry-led and -funded body should be responsible for monitoring its own members’ compliance with the rules, or whether it should fall to the CMA, the Financial Conduct Authority or another body.
Adshead-Grant stressed the importance of the future entity taking an active role of some kind in the development of open banking.
“There need to be practitioners in that talent set, people who have worked in industry at the coalface with 24/7 real-time systems," he said.
“I would get more concerned if open banking turns into a quango that only discusses strategy and white papers."
Author: Douglas Clarke-Williams