UK regulators and the Treasury have issued a joint update on the future of open banking, signaling that they “remain committed to supporting the continued growth of open banking” and promising to publish recommendations on the design of an Open Banking entity in Q1 2023.

A joint statement from the Treasury, the Competition and Markets Authority (CMA), Financial Conduct Authority (FCA) and Payment Systems Regulator (PSR) published on December 16, 2022, identified three priorities;

• Unlocking the potential of Open Banking payments to support competition and innovation by creating greater choice between payments methods and enabling exciting opportunities to build the next generation of payments, including more efficient and tailored services;
• Adopting a model that is scalable for future data sharing propositions; and
• Establishing a sustainable footing for the ongoing development of the Open Banking ecosystem.

It also sets out some indication of what the future Open Banking entity will look like, saying its responsibilities will include;

• Enabling the development of new Open Banking product and service propositions and support innovation and competition within the financial services sector which benefit consumers and businesses and support economic growth in the UK;
• Providing and maintaining the technical infrastructure and critical services for Open Banking, as well as improving and developing existing and new technical standards;
• Ensuring compatibility with the activities of other key actors in the ecosystem, eg Pay.UK in relation to Faster Payments scheme rules.

The current Open Banking Implementation Entity (OBIE) is overseen by the CMA. The statement envisions moving to an interim regulatory state in which the future entity will be overseen by the Joint Regulatory Oversight Committee (JROC) announced in March 2022 and by the CMA. This will be followed by the establishment of a long-term regulatory framework.

The JROC is currently finalising components relating to the structure, funding and governance of the new entity.

Small businesses

In its Open Banking Impact Report, published in June 2022, the OBIE found that “10-11% of digitally-enabled consumers are now estimated to be active users of at least one open banking service”. And it found open banking “has become a critical component of cloud accounting”, something that has been embraced by small businesses.

The report found that “small businesses of all sizes are adopting cloud accounting services, although penetration is higher among larger and more complex businesses”. Open banking feeds are an integral part of these services.

The report observed that: “Although cloud accounting services pre-date open banking, it is notable that 75% of users started using the service no more than three years ago, with 36% having adopted it within the past year.”

OBIE research found 87% of respondents had positive experiences of using cloud accounting services, with 73% saying cloud accounting made interaction with their accountant easier and 84% saying it made their business more efficient.