In December 2019, the FCA published a Call for Input (CFI) that asked financial companies and services to give their opinion on matters about Open Finance for the FCA to assess the next steps and how best to support the drive.

The CFI received 169 responses and the FCA’s Feedback Statement was published in March 2021.

The Feedback Statement makes for an interesting read and mmob agree with many points made about how Open Finance will come about. The full statement can be read here and this blog will highlight the key aspects of interest in the development of Open Finance.

What are the key points to take away?

The full statement provides a detailed breakdown of changes the FCA proposes, lessons learnt and opinions given by respondents in the CFI. The following are the key takeaways and overall lessons, rather than detailed problems with individual issues.

Consumer Awareness and Consideration

Few customers are aware of Open Banking and even fewer are aware of the vast benefits.

To help combat this, innovation should be market-led and reflect the needs of consumers, rather than technology-led that may result in consumers shying away from new tech that may not aid their financial problems.

For the same reason, confirmation of payee systems like those used by banks should be implemented to increase confidence in the security of data sharing. Data ethics should be transparent, so consumers understand the care that has been taken to ensure Open Finance is secure.

The principles for Open Finance focus largely on consumers and care should be taken to ensure consumers understand how their data will be used, whether it will be passed on, and that they have the right to withdraw their consent. A clause in the statement focussed on ensuring customers are not discriminated against should they choose not to share information.

While a large driving force for Open Finance is its inclusivity and the possibility to help those previously excluded from finance, the true capability of Open Finance relies on the sharing of data. Customers should be encouraged to share data where possible and when access is denied, it is with the understanding that services will not be personalised to their specific needs but the services they choose to use will not discriminate against them.

The Road to Open Finance

The Feedback Statement did not lay out a roadmap to Open Finance as this is still being developed but did make some interesting points about how Open Finance will come to be.

Open Finance will be achieved through gradual phases, rather than a ‘Big Bang’ implementation. This way companies have time to test services, reflect on consumer needs and prepare for Open Finance. Similar to this, there are calls for a ‘period of stability’ which allows companies to use existing functions and test Open Finance services. This period of stability will be crucial in developing confidence and ensuring customers understand the benefits of Open Finance.

Many respondents agreed that Open Finance development was more expensive than had previously been assumed and measures should be taken to reduce costs where possible and divide financial burden equitably to avoid smaller companies taking the strain. Nevertheless, the FCA warns that Open Finance is a large task for companies and sectors to undertake so guidance from bodies and regulators is important.

Following the success of the OBIE, it is thought an implementation entity will be needed to drive Open Finance and ensure uniformity across the ecosystem. Debates exist around whether an existing body should take up the mantel and if so, who, or how a new body should be formed.

There were mixed opinions regarding the financial incentivisation for Open Finance. It was generally agreed that these already exist and the Feedback Statement deemed they were necessary for the drive to Open Finance. However, incentives to promote certain products will lead to partiality and there is a risk the customers’ needs will be neglected for company profit. With regulations and monitoring of how data is used, incentives can be used to engage companies initially and in time the benefits will be apparent.

The Feedback Statement makes for an interesting read that breaks down the various ideas about Open Finance across the industry into practical plans for its development. While there are questions left unanswered, the FCA has helped channel fintech energy and excitement towards Open Finance development and mmob is keen to see Open Finance emerge in the next few years.

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