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Fintech players have urged the incoming Labour government in the UK to revive the Data Protection and Digital Information (DPDI) Bill and halt plans for authorised push payment (APP) scam reimbursements, but whether these issues will be addressed remains to be seen.
As expected, the UK’s centre-left political party has won the country’s general election and the fintech industry is eager to see how it proceeds with its commitments to open banking, open finance and other financial services legislation.
Scott Dawson, head of sales and strategic partnerships at DECTA, said it had been a “divisive” election, but that “what matters now is that the new government prioritises common sense policies, including those in favour of the fintech community and its significant potential to better serve UK businesses”.
Growth will be at the top of the agenda for Labour, which referenced both fintech and open banking in its manifesto.
According to Dawson, 14 years of discussions about fostering innovation, regional development and technology investment never translated into meaningful government action under the Conservative Party.
“Hopefully we’ll see a change to this now. Primarily, the government should look to actively promote private sector investment as and when it materialises.”
Labour, led by now Prime Minister Keir Starmer, won more than 400 seats and the result will mean a fresh approach to regulation.
Key players in the financial services space, such as Bim Afolami, the now former Conservative City minister and economic secretary to the Treasury, and Michelle Donelan, who had been science and technology minister, lost their seats in the election. In addition, open data advocate John Penrose stood down.
Dawson said it would also be good to see the new government learn from some of the most impactful changes that were implemented before the UK left the EU.
“The Payment Services Directive regulations, for instance, spurred innovation by introducing open banking and 3DS services,” he said.
“Embracing, not fearing, regulation could be a game-changer. Less aversion to strong government support would be positive and could unlock significant profit potential and fuel further innovation for UK businesses, helping them to prosper through better access to finance and financial services.”
Meanwhile, Nilixa Devlukia, chair of the Open Finance Association (OFA), told Vixio that as priorities are set, the trade association is calling on the new government to “create the conditions for competition, both nationally and internationally, rebalancing regulatory burdens with a pro-innovation framework aligned to the Labour party’s manifesto that called out financial services one of Britain’s greatest success stories and pledged to create the conditions to support innovation and growth in this sector, and in particular to support open banking and open finance”.
“We look forward to working with the new government to help it achieve these aims as our members, continue to empower consumers and merchants and secure economic benefits for users of open banking services and wealth creation for the UK economy,” said Devlukia.
More momentum from government
The previous government was enthusiastic about open banking and had been driving the DPDI bill through parliament. However, the calling of a snap election meant the legislation was put on hold.
"If the next government is serious about growth, they need to address the current regulatory gridlock in financial services,” said Jack Wilson, vice president of research and policy at TrueLayer.
He pointed out that the Payment Systems Regulator (PSR) consulted on expanding variable recurring payments (VRPs) in December 2023, yet as of July 2024, there has been no response. “It seems likely that any VRP deployments will be delayed until 2025 as a result.”
“Fintechs can and do deliver growth when given the right regulatory support, but they cannot afford to wait a year for each incremental regulatory development,” he said.
Wilson said he hopes that the new government will pick up where the last one left off with the DPDI bill, “specifically addressing interface bodies and open finance to finally overcome the inertia in UK open banking and open finance".
Echoing the thinking of many in the fintech space, Wilson also said that Labour should “seriously consider pausing the potentially catastrophic APP rules beyond October 7”.
“The system is simply not ready for such a major shift in liability, which will also add friction to open banking payments.”
Similarly, Tony Craddock, director general of The Payments Association, said he “especially hopes the Chancellor sees the benefits of lowering the threshold for mandatory reimbursement of an APP fraud claim”, as well as potentially introducing a dedicated anti-fraud minister.
“The current landscape is all too easy for fraudsters to navigate and the PSR’s proposed changes will only serve to exacerbate the situation,” he said. “Swift action as proposed in our letter is necessary to mitigate the potential threats once the changes are introduced on October 7.”
Creating new opportunities
The Payments Association has drafted a letter to the UK’s new finance minister, Rachel Reeves, highlighting the payments community’s priorities for the sector.
“We see the Chancellor’s appointment as an opportunity to maximise the potential of the payments sector while refocusing on its greatest threats,” said Craddock.
He added that it is essential that the new government and the payments industry work collaboratively to protect the UK’s global leadership position. “A clear vision and strategy from the new government will generate significant investment and promote the UK’s position as the global payments leader solidified and see sustained growth in every UK region.”
The Payments Association has also asked the incoming finance minister to spearhead the National Payments Vision and Strategy to modernise the UK’s payment system and urged her to publish it in Summer 2024.
The trade association advocates advancing the open banking and open finance agenda, which has already created 4,800 jobs and a sector worth £4.1bn.
For now, all eyes are on who the new government ministers to have oversight over the industry will be, and whether Tulip Siddiq, the Labour spokesperson for the City, will take her enthusiasm for championing fintech into the Treasury.
