FCA published the feedback statement FS21/7 with respect to the December 2019 Call for Input on maximizing the potential for open finance. The statement covers several key themes and issues for open finance: risks and benefits; feasibility and cost; the need regulatory framework, common standards, and infrastructure; and the FCA draft principles for open finance, including the next steps. The feedback statement will be of interest to consumers, banks, building societies and credit unions, consumer credit firms, electronic money and payment institutions, financial advisers, fintech and innovative businesses, general insurers and insurance intermediaries, investment managers, life insurers and pension providers, and mortgage lenders and intermediaries.
FCA had received 169 responses to this call for input. Responses show that open finance could potentially offer significant benefits to consumers, including increased competition, improved advice, and improved access to a wider and more innovative range of financial products and services. However, open finance would also create or increase risks and raise new questions of data ethics. Thus, appropriate regulation will be essential to managing those risks and giving consumers the confidence to use open finance services. A degree of consensus exists on the key building blocks needed for open finance to develop in the interests of consumers and these include a legislative and regulatory framework, common standards, and an implementation entity. The responses provided a significant evidence base on the key questions on open finance to help inform the future work at FCA and the government. In the 2019-20 business plan, FCA had committed to leading the debate on open finance and it, therefore, plans to support the government as it considers the timing, scope, and nature of legislation on open finance by:
- Sharing lessons from the implementation and supervision of open banking and the development of Pensions Dashboards
- Working with the government and industry stakeholders to identify what industry roadmaps are needed to support legislation
- Helping convene industry-led efforts to develop common standards to support open finance
- Assessing the regulatory framework needed to support open finance and working with the Information Commissioner’s Office to consider the need for any further guidance
- Furthering open finance and digital identity propositions applying for sandbox and direct support
- Supporting discussions on the future operating model for the Open Banking Implementation Entity
As the implementation phase of open banking ends, the Competition and Markets Authority (CMA) is consulting on arrangements for the oversight of the future system. FCA will work closely with CMA and HM Treasury as they consider the results of this consultation. It will be important that the entity is flexible and able to respond to any future legislative requirements. FCA is keen that any entity be open in terms of participation and funded equitably and sustainably.
Keywords: Europe, UK, Banking, Insurance, Securities, Open Finance, Fintech, Regulatory Sandbox, Regtech, Suptech, FCA
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