Open Banking evolution— pt2
[continued from part 1]
The history of the development of Open Banking in the UK is multi-faceted both in terms of its timeline and its actors.
The development grew from a diverse set of drivers ranging from a response to the financial crisis of 2007–2008 to national initiatives around open data, from encouraging a vibrant Fintech community to EU regulatory requirements around both payment services and personal data management.
In particular, the approach to Open Banking in the UK was shaped by new EU legislation in the form of the second Payments Services Directive (PSD2), implemented in January 2018, and the General Data Protection Regulation (GDPR), which will come into effect in May 2018. These two pieces of legislation provide fundamental rights for consumers of all types to own their own data, to transfer it to other parties with their consent, and to have the data remain private and used only for purposes that are made known to them and to which they have agreed.
The approach was also shaped by the Competition Markets Authority (CMA) which, after spending 21 months investigating retail banking in the UK, ordered the nine largest UK banks to implement standardised Open Application Programming Interfaces (APIs) and set the timetable to be coincident with PSD2 in January 2018. The CMA expectation was that Open APIs would be the most important mechanism to spur the competition and innovation in the banking sector that they had found lacking.
The timeline for Open Banking in the UK started with discussions within HM Treasury in 2013. These led to the commissioning of the Fingleton Report on Open Data Sharing for Banks, published in September 2014, exploring the competition and customer outcomes that might be possible if customers had the ability to share their data with third parties using APIs. In December 2014, George Osborne, Chancellor of the Exchequer, announced the UK’s intent to “lead the world in open banking”. Promptly thereafter, the government opened a Consultation to all interested parties, concluding in March 2015.
The next critical step was the decision by HM Treasury to proceed with the recommendation made jointly by the British Bankers Association, Payments UK and Innovate Finance UK during the Consultation to form a cross-industry Task Force to advance Open Banking.
The Open Banking Working Group (OBWG), as it became known, was formed in September 2015 with Co-Chairs Gavin Starks from the Open Data Institute and Matt Hammerstein from Barclays bank, tasked to create the framework for an Open Banking Standard. In three months, 150 participants from a diverse group of 80 organizations around six sub-group topics came together in a structured process to produce the Framework.
The Framework for the Standard then migrated to an implementation phase within a newly created Open Banking Implementation Entity (OBIE) funded by the nine banks under the CMA order. From the period September 2016, up to 125 contractors employed by the OBIE covered various required work streams and Open Banking for the nine banks went live on January 13, 2018.
The first implementation of Open Banking in the UK covers personal and business current accounts and SME loans, however, the payment types covered will continue to be expanded over time.
