FCA call for input: Open Finance - Which? response

Which? welcomes the opportunity to respond to the FCA’s call for input on Open Finance. The work that the FCA is doing is timely and is needed to ensure that due consideration is given to the future shape of the regulation and governance of Open Banking and Open Finance.

Financial services markets are complex and new technology is enabling rapid changes across sectors. It is vital that the FCA, with support from the Government, keeps pace with the changing landscape and maintains and introduces the necessary protections needed to support consumers.

Which? supported the introduction of Open Banking as an initiative that would give customers more control over their retail banking data and encourage innovation in a market that has not yet benefited significantly from competition. As the development of Open Finance continues, it is important to remember that it is consumer data that sits at the heart of this work and that further developments must be focused on delivering benefits for consumers. Our response to the call for input focused on three key themes:

1. The need for a clear consumer-focused approach to Open Finance. Open Banking was implemented by the CMA as a competition remedy in the retail banking market. It is not yet clear what the impact of the project will be for consumers. The FCA, supported by the Government, needs to ensure that the expansion of Open Finance initiatives will deliver a tangible benefit for consumers. As part of the development of any initiatives it is vital that consumers are able to give clear consent using secure authentication, that firms accessing data are suitably accredited and have the necessary regulatory oversight, and that there are clear protection and redress mechanisms in place for consumers.
2. The need for regulators and Government to recognise the risks and concerns of consumers. Consumers do understand the theoretical benefits of Open Banking enabled services. However, if consumers cannot be confident of better outcomes as a result of engaging with new products and services, there will be limited customer uptake and limited effects on competition. There are also concerns that Open Banking and Open Finance might lead to price discrimination in the market for consumers who are not engaging with data-sharing initiatives.
3. The need for a consistent approach across Smart Data initiatives. Work on Open Banking and Open Finance appears to be well ahead of similar work in other sectors. It is essential that the FCA takes the lead on Open Finance to ensure all relevant firms are regulated and consumers are fully protected. However, the work the FCA undertakes must complement the work of the UK Government, the CMA and regulators in other industries to ensure that the UK has a clear and coordinated approach to the regulation and oversight of Smart Data initiatives.