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UK Unveils Two-Year Open Banking Development Plan to Boost Fintech Apps

by Damian Chmiel
  • FCA wants to see more competition in the open banking services industry.
  • Seven million Britons currently use the UK’s open banking products.
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The Joint Regulatory Oversight Committee (JROC), which is co-led by the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR), has released its proposed guidelines for the upcoming stage of open banking in the United Kingdom.

Currently, the open banking services and products have reached more than 7 million consumers in the UK. The Committee wants this number to increase, promoting open banking to consumers and using fintech companies' apps in the coming years.

JROC Unveils Two-Year Open Banking Development Plan

JROC was established with the cooperation of the FCA and the PSR in March 2022, and its main purpose is to oversee planning and preparation for the creation of a future open banking entity and the transition to the future framework.

The term 'open banking' pertains to the utilization of banking data from clients at established financial institutions by third-party companies to provide customized services like lending and payments. This industry has contributed to the transformation of the UK's fintech sector into the third largest in the world.

More than a year after its establishment, JROC has published recommendations presenting the next phase of open banking development in the islands. Among the recommended steps were proposals to develop a scalable, secure and economically sustainable system.

To do that, JROC has laid out a roadmap of priorities for the next two years in the UK's open banking sector. The roadmap is focused on five key themes: leveling up availability and performance, mitigating the risks of financial crime, ensuring effective consumer protection, improving information flows to third-party providers (TPPs) and end users, and promoting additional services. As part of the roadmap, the JROC plans to pilot non-sweeping variable recurring payments (VRP) to explore new payment models. The recommendations are aimed at creating a more secure and inclusive open banking ecosystem in the UK.

"Open banking can be a UK success story and we want to help it grow and develop sustainably. Today's report sets out a roadmap and the framework for delivering the next phase of open banking," the Co-Chairs of the Committee, PSR's Managing Director, Chris Hemsley, and the FCA's Executive Director of Consumers and Competition, Sheldon Mills, said in the statement.

"Only through effective collaboration can we deliver on our ambition and develop open banking in a way that promotes continued innovation and competition, for the benefit of consumers, businesses, and the wider economy," the statement added.

The JROC has outlined its vision for the future of open banking and identified the necessary steps required in its design. This includes a transition from the current Open Banking Implementation Entity (OBIE) to the new entity that will build on the substantial progress achieved so far.

"Britain leads the pack in open banking, with 7 million users, but we can't sit back and put our feet up," Andrew Griffith, the City Minister, said. "Today's plan will deliver a new generation of products and services, making banking more accessible and convenient for millions of people."

The JROC will collaborate with industry stakeholders and oversee progress towards the five key themes and the design of the future entity. They will provide a progress report in Q4 2023 and a detailed plan for the transition from OBIE to the future entity. The roadmap's full timetable is outlined in the publication.

What Is the Future of Open Banking?

After Brexit, the UK is eager to advance open banking to draw in more fintech companies, especially since the European Union is preparing to launch its own comprehensive open banking scheme. While regulators have praised the successful implementation of open banking technology in the UK fintech industry, industry leaders cautioned against becoming too complacent.

According to Chris Hayward, the Policy Chief at the City of London Corporation, which manages London's financial district, the UK's fintech industry ranks third worldwide, with a total investment of $12.5 billion in 2022, following the United States and China.

Fintechs and challenger banks are projected to grow in the coming years. According to Business Insider Intelligence, digital banks will have over 75 million subscribers in the United States alone by 2023. This indicates a 25% growth over the current user base.

Value of open banking to consumers and businesses (2019). Source: Gov.uk
Value of open banking to consumers and businesses (2019). Source: Gov.uk

API integration is a significant focus in the industry, involving linking various software systems via APIs. APIs enable secure and efficient sharing of data between software systems. Within banking, API integration facilitates the exchange of consumer data among different financial institutions and enables the creation of innovative new services.

The Global Opportunity Analysis and Industry Forecast report states that the size of the global online banking market was worth $11.43 billion in 2019 and is expected to grow to $31.81 billion by 2027.

FCA Wants Greater Investor Protection

In the meantime, the FCA has released its business plan for 2023-2024, outlining its roadmap for the next 12 months in accordance with the three-year development strategy introduced a year ago. Its primary objective is to enhance overall investor protection.

Meanwhile, the UK is taking steps to prepare for cryptocurrency regulation by launching a public consultation to create a draft law on regulating digital assets.

To further bolster the safety of retail traders, the UK financial market supervisor has appointed joint Executive Directors of Enforcement and Market Oversight, Steve Smart and Therese Chambers, following Mark Steward's retirement in October last year.

Additionally, the FCA and the Advertising Standards Authority (ASA) have collaborated on a campaign to educate financial influencers and prevent the promotion of illegal 'get rich quick' schemes. The agencies have partnered with prominent social media influencer Sharon Gaffka.

Furthermore, the FCA is actively expanding its regulatory efforts, as evidenced by its rejection of 8,582 financial promotions in 2022, seeking their amendment or removal by authorized firms, which is an increase of 1,400% from the 573 financial promotions it rejected in 2021.

The Joint Regulatory Oversight Committee (JROC), which is co-led by the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR), has released its proposed guidelines for the upcoming stage of open banking in the United Kingdom.

Currently, the open banking services and products have reached more than 7 million consumers in the UK. The Committee wants this number to increase, promoting open banking to consumers and using fintech companies' apps in the coming years.

JROC Unveils Two-Year Open Banking Development Plan

JROC was established with the cooperation of the FCA and the PSR in March 2022, and its main purpose is to oversee planning and preparation for the creation of a future open banking entity and the transition to the future framework.

The term 'open banking' pertains to the utilization of banking data from clients at established financial institutions by third-party companies to provide customized services like lending and payments. This industry has contributed to the transformation of the UK's fintech sector into the third largest in the world.

More than a year after its establishment, JROC has published recommendations presenting the next phase of open banking development in the islands. Among the recommended steps were proposals to develop a scalable, secure and economically sustainable system.

To do that, JROC has laid out a roadmap of priorities for the next two years in the UK's open banking sector. The roadmap is focused on five key themes: leveling up availability and performance, mitigating the risks of financial crime, ensuring effective consumer protection, improving information flows to third-party providers (TPPs) and end users, and promoting additional services. As part of the roadmap, the JROC plans to pilot non-sweeping variable recurring payments (VRP) to explore new payment models. The recommendations are aimed at creating a more secure and inclusive open banking ecosystem in the UK.

"Open banking can be a UK success story and we want to help it grow and develop sustainably. Today's report sets out a roadmap and the framework for delivering the next phase of open banking," the Co-Chairs of the Committee, PSR's Managing Director, Chris Hemsley, and the FCA's Executive Director of Consumers and Competition, Sheldon Mills, said in the statement.

"Only through effective collaboration can we deliver on our ambition and develop open banking in a way that promotes continued innovation and competition, for the benefit of consumers, businesses, and the wider economy," the statement added.

The JROC has outlined its vision for the future of open banking and identified the necessary steps required in its design. This includes a transition from the current Open Banking Implementation Entity (OBIE) to the new entity that will build on the substantial progress achieved so far.

"Britain leads the pack in open banking, with 7 million users, but we can't sit back and put our feet up," Andrew Griffith, the City Minister, said. "Today's plan will deliver a new generation of products and services, making banking more accessible and convenient for millions of people."

The JROC will collaborate with industry stakeholders and oversee progress towards the five key themes and the design of the future entity. They will provide a progress report in Q4 2023 and a detailed plan for the transition from OBIE to the future entity. The roadmap's full timetable is outlined in the publication.

What Is the Future of Open Banking?

After Brexit, the UK is eager to advance open banking to draw in more fintech companies, especially since the European Union is preparing to launch its own comprehensive open banking scheme. While regulators have praised the successful implementation of open banking technology in the UK fintech industry, industry leaders cautioned against becoming too complacent.

According to Chris Hayward, the Policy Chief at the City of London Corporation, which manages London's financial district, the UK's fintech industry ranks third worldwide, with a total investment of $12.5 billion in 2022, following the United States and China.

Fintechs and challenger banks are projected to grow in the coming years. According to Business Insider Intelligence, digital banks will have over 75 million subscribers in the United States alone by 2023. This indicates a 25% growth over the current user base.

Value of open banking to consumers and businesses (2019). Source: Gov.uk
Value of open banking to consumers and businesses (2019). Source: Gov.uk

API integration is a significant focus in the industry, involving linking various software systems via APIs. APIs enable secure and efficient sharing of data between software systems. Within banking, API integration facilitates the exchange of consumer data among different financial institutions and enables the creation of innovative new services.

The Global Opportunity Analysis and Industry Forecast report states that the size of the global online banking market was worth $11.43 billion in 2019 and is expected to grow to $31.81 billion by 2027.

FCA Wants Greater Investor Protection

In the meantime, the FCA has released its business plan for 2023-2024, outlining its roadmap for the next 12 months in accordance with the three-year development strategy introduced a year ago. Its primary objective is to enhance overall investor protection.

Meanwhile, the UK is taking steps to prepare for cryptocurrency regulation by launching a public consultation to create a draft law on regulating digital assets.

To further bolster the safety of retail traders, the UK financial market supervisor has appointed joint Executive Directors of Enforcement and Market Oversight, Steve Smart and Therese Chambers, following Mark Steward's retirement in October last year.

Additionally, the FCA and the Advertising Standards Authority (ASA) have collaborated on a campaign to educate financial influencers and prevent the promotion of illegal 'get rich quick' schemes. The agencies have partnered with prominent social media influencer Sharon Gaffka.

Furthermore, the FCA is actively expanding its regulatory efforts, as evidenced by its rejection of 8,582 financial promotions in 2022, seeking their amendment or removal by authorized firms, which is an increase of 1,400% from the 573 financial promotions it rejected in 2021.

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