The Financial Conduct Authority will jointly oversee the future of the UK’s ongoing open banking implementation alongside the Payments Systems Regulator, which sits under the FCA’s wing.
Open banking allows advisers, wealth managers and platforms to bring together a client's financial situation in one place.
Back in October, the Competition and Markets Authority said the Open Banking Implementation Entity was not properly managed by its former boss, who has since resigned.
The competition watchdog has now published its report on the future oversight of open banking.
“We think that the future oversight of open banking should be jointly led by the FCA and the PSR,” the CMA said on March 25.
“The FCA authorises, regulates and supervises open banking and payment firms, including through its role as competent authority for the Payment Services Regulations 2017. The PSR is the economic regulator for payment systems.”
A new regulatory oversight committee will be established, led jointly by the FCA and PSR, with HM Treasury and the CMA as the other members.
Set to convene its first meeting sometime in the next three months, the committees "top priority" will be "a more broad-based funding model" so the regulators are more adequately resourced to oversee open banking adoption.
The CMA said it will continue to oversee order-related activities until the establishment of a long-term regulatory framework for open banking by the FCA and PSR.
“We consider that [the] government may need to bring forward legislation to provide the FCA and the PSR with additional formal powers they may require to enable them to effectively oversee the future entity,” it said.
The PSR is a fully independent subsidiary of the FCA which shares some operational services.
One of the responsibilities of the FCA in its oversight of open banking will be further development and growth of its implementation, including the growth of open application programme interface (API) propositions “in the interests of all end-users and industry participants”.
The OBIE was created in 2017 following a CMA order to play a key role in the UK’s advancements as a fintech hub.
Its particular purpose has been to get the country’s nine largest retail banks to effectively implement open banking - a technology infrastructure allowing third-party firms to plug into banks’ systems and offer consumers more competitive products.
But the CMA has since found that “inaction and failures by the leadership of the OBIE allowed a culture of bullying and intimidation to prevail”.
The competition watchdog concluded last year that such leadership had led to “failings in the system of risk management and internal control”, and a “failure to engage in effective workforce engagement, including when complaints were made”.
As of January 2022, around 5mn people were using services powered by open banking technology in the UK. That's around 8 per cent of the population. By September 2023, the aim is to have 60 per cent of Brits using open banking for payments - a twelve fold increase on the current figure.