’Lack Of Vision’ Holding Back Open Banking

February 2, 2023
Charlotte Crosswell sets out her recommendations for how the UK should move forward on open banking after stepping down as trustee of Open Banking Limited and chair of the Open Banking Implementation Entity.

Charlotte Crosswell sets out her recommendations for how the UK should move forward on open banking after stepping down as trustee of Open Banking Limited (OBL) and chair of the Open Banking Implementation Entity (OBIE).

Echoing what many in the industry have said, Crosswell, the now former chair of the OBIE, has said that open banking is “ready to move to the next phase in its journey”.

The UK’s Competition and Markets Authority (CMA), which oversees open banking, has agreed as well, confirming in May 2020 that the roadmap for open banking was substantially complete.

However, Crosswell also warned that a lack of collaboration among departments could hinder open banking.

"One of the impediments to progress has been the absence of a clear cross-department vision for developing the UK into a Smart Data economy, where people and businesses have rights to access their data, wherever it may be held, and benefit from a wide range of new choices and innovations,” she commented.

Crosswell warned that this lack of a clear long-term vision for Smart Data has made it increasingly difficult to develop a roadmap to move from the current Open Banking ecosystem to a full Smart Data ecosystem.

“Whilst significant progress has been made, there is still much more to do to optimise and deliver the full benefits of Open Banking within retail banking markets, and beyond,” she said in a statement. “I hope that my recommendations and personal views will be useful as the CMA and JROC [Joint Regulatory Oversight Committee] decide how to ensure the many benefits of Open Banking is sustained and developed going forward.”

Among her recommendations, the former Innovate Finance chief said that the JROC, which is responsible for creating the Future Entity, should take “immediate” steps to rectify funding and liability issues.

This includes reviewing corporate structure models such as extending the funding liability to a wider group of participants.

Such a move could potentially include third-party providers, who have been able to benefit from the CMA order so far, having to also contribute funds to the entity.

Crosswell also advocates for an overhaul of the current approach to fraud prevention.

She warned that unnecessary friction such as warnings and additional screens, payment failures such as payment declines and a lack of information provided to third-party providers (TPPs) when things do not work is standing in the way of progress.

This is linked to the current Contingent Reimbursement Model (CRM), she said, pointing out that the code has meant many banks are adopting blanket, and not-risk based, warnings.

Banks also apply low payment limits, which Crosswell pointed out are due to the UK’s current Payment Services Regulation, which is derived from the EU’s revised Payment Services Directive (PSD2).

This system, she said, results in banks being able to apply a blanket approach, irrespective of the risk levels.

Here, Crosswell has recommended that the JROC remove the principle of equivalence.

By making this change, JROC could enable performance benchmarks that reflect the needs of the ecosystem, rather than adherence to performance in bank channels.

Crosswell also called for the development of a "white-list" of payees, such as HM Revenue & Customs (HMRC) and other government agencies.

Meanwhile, she has recommended that TPPs be made to implement Transaction Risk Indicators (TRIs), with banks being compelled to “take full account” of these, as well as shifts in liability if TPPs are willing to accept them.

Crosswell has now departed her role as chair and trustee of the OBIE, and has been replaced by Marion King, another City grandee.

King’s experience includes chief executive of Mastercard’s UK and Ireland subsidiary, as well as Vocalink.

In August 2022, she stepped down from her role as director of payments at NatWest, having worked there since January 2015.

The OBIE was set up in 2016 by the UK's largest banks, known as the CMA9, to deliver open banking.

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