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The Financial Conduct Authority’s (FCA) vision for open banking sets out guiding outcomes that firms should consider as the regulator looks to define the nascent and growing sector.
On December 16, 2025, the FCA published its report on commercial variable recurring payments (cVRPs), announced plans to establish the UK Payments Initiative (UKPI) and launched a dedicated open banking and finance webpage.
This package of updates makes clear the regulator’s intention to prioritise open banking in the coming year, despite an already busy agenda.
Use of open banking is quickly entering the mainstream, with recent data from Open Banking Limited stating that there are more than 16m active users in the UK.
As such, open banking developments are being closely monitored not just by the FCA, but also by the government, the Competition and Markets Authority (CMA) and industry.
Public bodies within the UK are keen for progress, both because open banking has the potential to promote competition and innovation in the UK payments ecosystem through greater choice and flexibility for consumers and businesses, and because of its potential benefits in terms of financial inclusion.
Breaking down the landscape
The UK’s National Payments Vision (NPV), published in November 2024, designated the FCA as the lead regulator of open banking, sunsetting the Joint Regulatory Oversight Committee (JROC), which had overseen open banking development since April 2023.
VRPs are an open banking payment mechanism that allows users to securely authorise trusted third parties to manage recurring transactions at varying intervals and/or amounts.
Functionally, VRPs are similar to direct debits, but offer potential advantages in terms of security and efficiency.
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VRPs |
Direct Debits |
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Flexibility |
Customers can cancel right up to the moment before the payment is made. |
Cancellations must be made minimally a day before the payment is due. |
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Payment Rail |
Processed on Faster Payments, settlement is almost instantaneous. |
Processed using the BACS clearing system which has a three-day settlement cycle. |
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Security |
Given that VRPs are payer-initiated, they are subject to Strong Customer Authentication (SCA) rules, making them more secure. |
Merchants store the Direct Debit instructions for each customer in their own systems, which can be subject to data breaches and increases risk. |
The NPV called for an industry-led approach to develop cVRPs. The FCA and industry’s response to this was the UKPI, a new company formed by 31 firms to operate a commercial VRP scheme.
The UKPI is intended to help expand VRPs into a series of new use cases, such as utility payments, financial services payments and payments to local and central government. Live payments under the scheme operator are expected by Q1 2026.
The UKPI is not to be confused with the proposed “Future Entity”, meant to succeed Open Banking Limited, which has been driving industry workstreams for the open banking sector alongside the regulators.
Subject to future legislation, the Future Entity is set to be the primary standard-setting body for open banking application programming interfaces (APIs) in the UK. Its responsibilities will include:
- Monitoring API performance.
- Providing directory and certification services.
- Setting common standards to define the minimum level of service and interoperability across open banking services.
- Ensuring adherence to relevant standards (including providing information to the FCA).
- Working with multilateral agreement (MLA) owners/operators to develop standards that enable commercial schemes.
The Future Entity is expected to operate as a not-for-profit, collecting revenue on an equitable basis from its users and beneficiaries. At this stage, the FCA does not expect the Future Entity to be a public body or have its own enforcement powers.
What to expect on the regulatory horizon
The recently published Regulatory Grid, which outlines the regulatory pipeline over the next two years and is jointly produced by the UK’s financial services regulators and government, forecasts that the Statutory Instrument for Open Banking will be laid in Q4 2026.
This will give the FCA new powers to set open banking rules. The regulator is expected to consult on new rules for the long-term regulatory framework shortly thereafter, potentially before the end of 2026.
Although the precise approach the FCA will take to rule development to form the open banking regulatory framework will depend on the powers it receives from the government, it has already begun to engage extensively with industry.
The regulator has outlined the following strategic outcomes of open banking, which are likely to guide its regulatory framework:
- Accessible and valuable to consumers: Open banking must be accessible, convenient, widely available and its benefits clearly known to consumers.
- Ensures safety and security: The framework should protect the security and integrity of account-to-account payments and customer consented data sharing, ensuring appropriate consumer protection, minimising the risk of fraud and financial crime.
- Scalable and responsible: The framework should be flexible and responsive to increases in demand and new product developments.
- Interoperable: Open banking should be interoperable not only between institutions and industries, but internationally as well.
- Promotes competition and innovation: The framework should be designed to foster competition and support innovation, unblocking greater opportunities for growth.
These outcomes are unlikely to come as a surprise, and are largely in line with the FCA’s mandate as a conduct regulator with concurrent competition powers.
Firms should evaluate how to streamline their engagement with the regulator against these key areas, taking the time to consider which are most relevant to their own operations.
What your firm should consider
First, firms should consider how they may benefit from the introduction of open banking products, given rising consumer adoption and the overarching governmental support for its development in the UK.
Second, firms that already offer open banking products, or that plan to in the near future, should monitor future engagement from the FCA on its proposed regulatory framework, as well as legislative updates on the powers conferred to the FCA. In the longer run, they should track updates regarding the establishment of the standards-setting Future Entity.
Clarity on the regulator’s next steps and expectations is always welcome. However, given the pace of consumer uptake of open banking, there are concerns that any delays in the legislative process or elsewhere will hinder timely guidance for industry for a sector that is growing rapidly.
It is crucial that open banking regulation and standards remain a priority for the regulator, despite similarly large-scale activity taking place across the payments ecosystem.
