A Brief History of Open Banking Implementation and what next from JROC?

As a busy year of activity on the future of Open Banking draws to a close, it is timely to look back over the UK’s journey to date, how we’ve reached this point, and what we’re expecting next from policymakers.

Where did JROC come from? What does it seek to achieve? What next on Open Banking? How does this connect to the UK’s wider ‘Smart Data Economy’ ambitions?

This Innovate Finance blog provides a retrospective on Open Banking implementation, and an aide memoire on the alphabet of acronyms within this evolving ecosystem - from API to JROC to VRP.

The start of the journey

The UK’s Open Banking journey started in November 2014, after the Competition and Markets Authority (CMA) published its decision to launch a detailed investigation into the personal current account (PCA) and small and medium enterprise (SME) retail banking markets. The regulator determined there had been little change in competition within the sector’s largest banks, and that innovation from the smaller ‘challenger’ banks¹ could offer consumers and the wider economy considerable benefit.

In 2015 the government announced commitments to deliver an ‘open standard’ for Application Programme Interfaces (APIs) and cross-sectoral data sharing between banks and FinTech Third Party Providers (TPPs)².

In 2016, the CMA published its final report of its investigation into the UK Retail Banking market³. The report mandated the implementation of a number of remedies to drive greater competition, which resulted in the creation of the Retail Banking Market Investigation Order 2017⁴ (also known as The CMA Order or ‘the Order’).  This also complemented the UK’s changes in line with the European Union’s Payment Services Directive 2 (PSD2) through the Payment Services Regulations 2017, requiring all payment account providers to provide regulated firms access to customer accounts with their consent⁵.

To deliver the remedies, the government worked with the largest banks in the UK (the CMA9⁶) to create and fund the Open Banking Implementation Entity (OBIE) to build the standard and guidelines necessary to drive the development of data sharing capabilities from payment accounts.

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¹ Innovate Finance: Better Banking
² UK Gov: Spring Budget 2015
³ CMA: Retail Banking Market Investigation - Final Report
⁴ CMA: Retail Banking Market Investigation Order
⁵ FCA: Payment Services Directive
⁶ OBL: CMA9

Under the guidance of this strong, centralised standard setting body, Open Banking is now a trusted part of the UK’s financial infrastructure and has seen significant growth - with 11.4 million payments across businesses and consumers by August 2023, including 872,000 Variable Recurring Payments (VRPs) transactions in July⁷. VRPs are a relatively new way to pay whereby customers safely connect authorised payment providers to their bank account to make payments or transfers on their behalf in line with agreed limits⁸.

The UK has been heralded globally for its successful implementation and thriving Open Banking ecosystem. Whilst originally designed to increase competition within the banking sector, the innovation it has spurred across the Fintech sector now provides a wide range of services for both consumers and small businesses - from more informed financial decision making and money management, to swifter credit decisions. OBIE has also set an early benchmark for potential governance frameworks for further developments into Open Finance, and wider Open Data.

Preparing for the next phase

With the CMA roadmap deemed complete⁹, government and industry have been keen to ensure the UK continues to build on these achievements, looking ahead to the future opportunities in this sector. The Joint Regulatory Oversight Committee (JROC) was formed to agree and execute these ambitious next steps. The Committee consists of HM Treasury, the Financial Conduct Authority (FCA), the Payment Systems Regulator (PSR), and the Competition and Markets Authority (CMA), with OBIE (now Open Banking Limited - OBL) supporting the group’s work. 

The Committee¹⁰ aims to ensure competition and consumer protections are championed, maintained and considered within industry’s development of its cross-system data-sharing capabilities, whilst making sure the Open Banking model is shaped to equip future data-sharing capabilities; including cross-sectoral.

JROC unveiled its report on the next phase of Open Banking at the Innovate Finance Global Summit in April 2023¹¹, setting out the future vision for Open Banking in the UK and the key milestones needed to achieve this. In his speech at the Innovate Finance Global Summit, then Economic Secretary Andrew Griffith MP promised that 2023 would be "the year of delivery for the next generation of Open Banking".

Over the summer six JROC workstreams were established, with ambitious deadlines to reach conclusions this autumn, looking at specific issues to improve the current system and expand its scope - from the evolution of OBL into a new Future Entity, which looks to future market-led multilateral data-sharing agreements, with the introduction of commercial Variable Recurring Payments (cVRPS - often also called ‘non-sweeping’¹²) serving as a pilot in this regard. Workstreams were also set up to research the required granularity of information flows, how to address dispute resolution, tackling fraud and financial crime, and how best to monitor API performance. 

Throughout this period, Innovate Finance has been working extensively with our members, industry and policymakers to feed into the recommendations of the various workstreams, ensuring they recognise the FinTech perspective and are suitable outcomes for the sector and its customers. From the potential need for a regulatory backstop to ensure comprehensive availability of new datasets right across the banking industry, to a fair and balanced division of funding obligations when it comes to the Future Entity (as contributions will now be expected from all ecosystem participants beyond just the banks).

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⁷ OBL: Open Banking reaches 11 million+ payments milestone
⁸ OBL: Variable Recurring Payments
⁹ OBL: Trustee End of Implementation Roadmap.
¹⁰ FCA: Joint Regulatory Oversight Committee sets out next steps to help UK Open Banking growth
¹¹ JROC: Recommendations for the next phase of open banking in the UK
¹² ‘Sweeping’ is the transfer of money between a customer’s own accounts, ‘non-sweeping’ is the transfer of money from a customer’s account to a business or to pay a bill

What next from JROC?

Having now received all the workstreams’ recommendations, JROC is deliberating on the details in each area to determine next steps and milestones for 2024 and beyond.

As they conduct this analysis, Innovate Finance’s full position paper on the key issues under consideration can be found here.

Alongside this preparatory work, the legislative foundations are also being set as Parliament debates the Data Protection and Digital Information (DPDI) Bill. This long-term regulatory framework will enact the necessary powers for potential future data sharing arrangements beyond payments accounts, which could include savings, loans and mortgages or more widely insurance and investments.

Whilst the Open Finance roadmap isn’t yet clearly articulated in terms of priorities and timings, this is an important underpinning bringing it closer to reality. The Bill looks to establish Smart Data across a number of new areas in the economy too, from energy to telecoms. As these arise there’s a lot to learn from OBIE’s journey, and we envisage the next iteration of OBL as the ‘Future Entity’ will be a significant actor in the ongoing future success of the UK Open Data story.

-ENDS-