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April 14, 2021

Our response to future oversight of the CMA’s open banking remedies

Kat Cloud

The Competition and Markets Authority’s (CMA) open banking remedies have been a driving force behind the development and growing use of open banking within the UK. Now as regulators, policymakers, and industry players turn their gaze towards open finance, it’s essential that any future oversight be fit for purpose.

A brief review 
The CMA has opened a consultation on the future governance of open banking, which until now has been guided by the Open Banking Implementation Entity (OBIE), created in 2016 with the principal mission to build and develop open banking in the UK. The Future Entity (FE) that will be its successor should therefore build on the work done but not seek to replicate it, specifically with regards to the development of detailed API standards.

To better understand why, we must go back five years to when access to consumers’ payment account data by Third-Party Providers (TPPs) became a legal requirement. At first, Account Servicing Payment Service Providers (ASPSPs) were unable to meet their obligations to provide consistent access to their consumers' payment accounts due to, what primarily was, their lack of technical expertise.

This is what led to the CMA’s creation of the OBIE, which provided a solution. What has come about since—and what the CMA could not have foreseen—is the introduction of network companies like Plaid, whose purpose is to build and provide API-based access to banks and fintechs. Between the rise of these networks and the adoption of other solutions (such as upscaling) that fill the technical deficit at the root of the problem, the original CMA market failure identified in the Retail banking market investigation no longer exists.

The need for API monitoring
Instead, a different challenge must be overcome - API performance and availability. Once again, ASPSPs lack the technical expertise to ensure their APIs are performing as required. Network companies—Plaid included—have been working hard to overcome these performance issues, but ultimately require support from the CMA and FE.

In fact, one of the principal functions of the OBIE is ASPSP APIs monitoring. This key responsibility of the OBIE must be transitioned to the FE, as open banking is only able to function properly if the APIs underpinning access are both robust and stable. To ensure the next stage of open banking is a success, the FE must be permitted to leverage market data and must be granted appropriate enforcement capabilities.

Fast forward to today, and we’re still seeing certain ASPSPs’ APIs failing to meet performance and availability requirements to the detriment of consumers. Only once TPPs can fully rely on the API interfaces provided by ASPSPs can the market deliver more open banking products and services. This, in turn, will enable consumers and businesses to build confidence in open banking and open finance, and fully reap the benefits.

As the CMA and FE move forward and consider the future of open banking, they must work with TPPs, ASPSPs and other industry players to ensure open banking remains a success.