FCA reports cost and data ethics among the industry’s top concerns for Open Finance
The call for input feedback highlighted the industry’s concerns and questions surrounding the implementation of open finance.
The call for input, which closed in October 2020, was initially laid out in the FCA’s 2019/2020 business plan and was intended to help drive forward the UK’s adoption of open banking, eventually reaching a point when open finance would be achieved.
The FCA defines open finance as the re-use of data supplied and created by customers of financial services by a third-party in a safe and ethical environment to improve financial transparency.
On Friday, the regulator published its feedback to the 169 market responses that it received, including some key insights on the industry’s attitude towards open finance.
Cost was among the chief concerns, with respondents signalling that “the cost of delivering open banking had exceeded what was originally expected,” and as a result, work needed to be put in place to ensure open finance “could be delivered at a lower cost.”
Feedback also indicated that, if open finance were to be made the goal, the costs of implementing it would need to be more equitable as the cost for smaller firms was disproportionately large.
In a statement published on Friday, the FCA wrote: “Responses show that open finance could potentially offer significant benefits to consumers, including increased competition, improved advice and improved access to a wider and more innovative range of financial products and services.”
“It would also create or increase risks and raise new questions of data ethics. Appropriate regulation will be essential to managing those risks and giving consumers the confidence to use open finance services.”
The FCA also acknowledged that the Covid-19 pandemic had already accelerated some of these changes, with more companies having to implement digital solutions in order to keep running.
Respondents also noted that updating legacy systems in incumbent firms would speed up the process of open finance and “would lead to overall modernisation among firms, benefitting them and their customers.”
Most of the respondents to the Call for Input also argued that open banking needed to be more widely accepted before open finance could even be considered, with a particular mention to the long-delayed Pensions Dashboard Programme as a key roadblock to open finance.
Similarly, nearly all respondents agreed that in order for open finance to succeed, common standards needed to be implemented.
The feedback suggested that there needed to be API specifications, data sets and definitions, operating principles, processes and practices, security protocols, and user experience standards.
The FCA also said it would continue to work with the government to support the implementation of Smart Data legislation and “support industry-led efforts to develop common standards and roadmaps to open finance.”