Open banking is a theme that has been running in the API economy for a number of years, with start-up and challenger banks hugely keen to leverage existing data held by large banking organizations to build their business and provide better products for banking customers. In the wake of Brexit, the UK Government has taken a step closer to realizing such an open banking framework with the announcement of a series of measures by the Competition and Markets Authority (CMA) that are designed to encourage the established UK banks to “work harder for customers” by forcing an open banking model on the industry with an aggressive timetable for adoption.
The CMA report includes their perspectives on the benefits of open banking for customers and how, underpinned by industry standard open APIs it will open up the banking market for much greater competition. Their views include:
- The need to create an open API framework to “accelerate technological change in the UK retail banking sector” and provide the backbone of banking network that gives customers choice without compromising the security of their data;
- The need for banks to publish “trustworthy information about service quality” so customers can make an informed decision about which banks or banking products they choose;
- Ensuring banks are proactive in helping customers manage their finances by creating “events” that prompt them to take action to allow them avoid incurring charges when, for example going unwittingly overdrawn.
The sentiment of the report is admirable and a much needed boost for the creation of a level playing field for banking customers, powered by APIs. However, as always the devil is on the detail and the report also proposes a timetable for the next steps in progressing the development of the UK open banking initiative, with the “development and adoption of an open API standard” targeted between Q1 2017 and Q1 2018. This activity is critical to the delivery of all the measures detailed in the report, yet bizarrely the CMA has made the “Largest banks in GB and NI” responsible for delivering the initiative.
The wisdom of this decision is questionable given it is precisely these organizations who are at the center of the anti-competitive behaviors (whether intentional or not) that prompted the need for regulation in the first place; an independent, fast moving body, unencumbered by the culture and IT legacy of the big banks with the appropriate regulatory powers would be far more effective in creating this underlying framework. It therefore remains to be seen whether the incumbents can work together to deliver an open API standard for the betterment of the banking industry in UK, or whether this initiative will be stymied by their vested interests.