JROC Releases Recommendations for The Future of Open Banking in the UK

Open Banking
17.04.2023 01:35 pm

The JROC is formed of HM Treasury, the Competition and Markets Authority, the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR). The FCA and PSR are the committee’s co-chairs.

The JROC is playing a leading role in taking the next steps to realise the full potential of open banking, which currently has over 7 million active users in the UK. This will bring opportunities for new products and services, allowing consumers and businesses to share data and make payments in more convenient and efficient ways.

Taking the steps, set out in the report, will enable open banking to develop further in a safe, scalable and economically sustainable way. The JROC’s recommendations contain a roadmap of priorities over the next two years, covering five key themes:

levelling up availability and performance
mitigating the risks of financial crime
ensuring effective consumer protection if something goes wrong
improving information flows to third party providers (TPPs) and end users
promoting additional services, using non-sweeping variable recurring payments (VRP) as a pilot

The JROC also sets out its vision for the open banking future entity, including the next steps which need to be taken in designing it. There will be a transition from the Open Banking Implementation Entity (OBIE) to the future entity which will build on the significant progress made to date. In addition, the report outlines the principles that will underpin a long-term regulatory framework, which the government is intending to legislate for.

Hiroki Takeuchi, co-founder and CEO at GoCardless:
“This Report is an important milestone in the UK’s open banking journey. We welcome JROC’s prioritisation of the roll-out of Variable Recurring Payments (VRPs) so that more UK businesses and consumers can benefit from them. I’m also pleased to see a focus on technical, but important, issues which need resolving in the background.
“Above all, the report highlights the need for Government, the regulatory authorities and industry participants to work together for JROC’s vision to be achieved. There isn’t a moment to lose and we’re excited to play our part.”

EmmaSteeley, Chief Executive of Freedom Finance:
“The UK is already a global leader in the use of Open Banking technology and its success is tangible evidence of the benefits that the fintech sector in this country can deliver for consumers when acting in lockstep with the government, regulators and the wider financial service industry.
“It is encouraging to see the commitment in this roadmap to building up scale which is pivotal to Open Banking becoming ubiquitous in this country. To achieve this, the ecosystem needs to increase competition by offering consumers the widest possible selection of providers, products and services from the most reputable brands to deliver safety and choice.
“In the consumer credit sector, Open Banking is significant because the widespread sharing of transaction data can help lenders deliver more personalised and suitable products by using a far wider set of criteria to assess customers. This not only matches products with customers in a bespoke manner but increases access to the credit market by generating a far more accurate risk profile of a customer through an increasingly holistic assessment of their creditworthiness compared to the narrow parameters used to generate credit scores.
“For example, it means a person with a thin credit file through no fault of their own – like divorcees or expats returning to the UK – but posing no greater risk to lenders will not face exclusion from the market.
“We urge the industry to continue working with the government to push forward proportionate regulation, improve data sharing and support the development of payments capabilities. Only through fintechs, government and the retail financial services working together can we make Open Banking a truly great UK success story.”

Todd Clyde, Chief Executive Officer at Token.io:
Today’s publication of the JROC’s recommendations is a significant milestone and opportunity for all open banking stakeholders in the UK.
We are particularly pleased to see regulators recognise the potential of non-sweeping Variable Recurring Payments (VRPs) in their roadmap for open banking. VRPs are key to unlocking richer open banking use cases, such as one-click e-commerce payments and subscription payments. With the total transaction value of all open banking payment transactions in the UK projected to surpass $82 billion by 2027 (from $13.6 billion in 2022), we expect the availability of non-sweeping VRPs to be an important catalyst for the adoption of open banking-enabled payments.
It is also positive that the regulator has identified a clear and continued role for a strong central entity to both maintain and expand the UK’s open banking ecosystem. The OBIE has been a key driver of the UK’s success in open banking to date, and in particular, in enabling seamless open banking-enabled user experiences.
The regulators’ broader recognition of the opportunity presented by premium APIs is more welcome news. Premium APIs, built on balanced commercial models, can support the development of higher quality APIs and will also enable the development of a broader open finance ecosystem (across mortgages, pensions, investments, and more).
With other jurisdictions now also developing sophisticated building blocks for the future of open banking and open finance (including premium API schemes) the UK risks losing its position as an open banking world-leader. Banks, third party providers and regulators must now seize the opportunity to work together to take open banking to the next level and drive better outcomes for both consumers and merchants."