Open Banking is a global phenomenon changing how banking is conducted all across the world where the UK is leader. In fact, 87% of all countries now have some sort of Open API (Application Programming Interface) activity, according to a study conducted by INNOPAY and The Paypers. This leaves no room for doubting that what we are seeing is a before and after in the banking sector.
Among the frontrunners in implementing Open Banking, one country stands out as the uncontestable global leader: the United Kingdom. the UK is in the forefront of Open Banking development, with the highest number of APIs, most mature and stable, with a significant API consumption, and a well structured regulatory sandbox.
The objective of Open Banking in the UK
In the UK, the Competition and Market Authority (CMA) states that open banking will “accelerate technological change in the UK retail banking sector. Open Banking will enable personal customers and small businesses to share their data securely with other banks and with third parties to enable consumers to take more control of their funds”.
So, in essence, open banking is an initiative intended to invite banks to share their data and to collaborate with fintechs, as well as banks, to create new products and services with one purpose only; to benefit consumers.
Since its inception in the UK, Open Banking has now become a global movement and in many cases with objectives linked to financial inclusion, and providing services to underbanked or unbanked.
The UK’s Open Banking is regulatory-driven
When talking about Open Banking, it is important to understand what is fostering the openness of data within banks. In the case of the United Kingdom, Open Banking is regulatory-driven. As clearly explained by our Open Banking expert Paul Rohan, regulatory-driven Open Banking encourages sharing data in a standardised way, in order to promote a healthy level of competition and innovation in the sector to better serve consumers.
How is Open Banking regulated in the UK?
The UK’s open banking regulation is called the Competition and Market Authority Order or CMA Order for short. The CMA Order was applied to the top 9 banks in the UK, later known as the CMA9. These are: Allied Irish Bank, Bank of Ireland, Barclays, Danske, HSBC, Lloyds Banking Group, Nationwide, RBS Group and Santander
It was implemented in 2017 when the Open Banking Implementation Entity was formed to act as the entity that would have the remit to deliver the CMA Order.
The Order mandated the delivery of an open and common banking standard to allow for the following:
- The release of reference information via Open Data APIs, to include:
- all branch and business centre locations
- all branch opening times;
- all ATM locations
- The release of specific product information via Open Data APIs including Product prices, all charges, Features and Benefits, terms and Conditions and customer eligibility for various products such as Personal Current Accounts (PCA), Business Current Accounts (BCA), SME Loans and Commercial Credit Cards
Requirements to participate in the UK Open Banking
In the UK, fintechs must register through the FCA (Financial Conduct Authority) under their strict processes which will provide the approved fintech with further access to the CMA/OBIE service as the first step into open banking in the UK.