The future of open banking: JROC report paves the way

Henk Van Hulle at OBL explains what the latest update from the Joint Regulatory Oversight Committee means for open banking and where we are heading next

Open banking in the UK has taken an important step forward, following the recent publication of the Joint Regulatory Oversight Committee’s (JROC’s ) report on the design of the Future Entity. The report reaffirmed the Government’s commitment to deliver the next phase of open banking and provided much-needed certainty to the market.

It will also enable continued investment in our world-leading open banking ecosystem and ensure the future framework continues to support the delivery of innovative products and services.

Open banking is a UK success story, counting more than 9 million active users since 2018. With impressive month-on-month growth in both the number of users and payments, its adoption in the UK has already helped to add more than £4 billion to the economy, attracting inward investment and creating around 5,000 highly skilled jobs. 

Consumer adoption continues to grow, and Open Banking Limited’s (OBL’s) latest Impact Report shows that 14% of digitally active customers (1 in 7) have made a payment using open banking or have an active open banking connection. For example, there are a wide range of money management and savings apps which offer consumers a clear view of their finances to help them budget, build a regular savings habit, and manage unused subscriptions and services. 

The UK’s businesses are also driving adoption – 18 per cent of small to medium enterprises now benefit from real-time insights on their cash flow and faster access to cost-effective lending via open banking-enabled accounts software. Firms can even use embedded finance links in their invoices to help ensure prompt payments.

So what’s next for open banking?

The JROC report sets out recommendations for a Future Entity that will help unlock open banking’s full potential. This entity will continue to have the public good at its heart as we move to a more commercially sustainable model. JROC has also defined the five workstreams it wants to focus on immediately. These include mitigating the risks of financial crime, ensuring effective consumer protection if something goes wrong, and promoting additional services using non-sweeping variable recurring payments (VRPs).

The Chancellor’s proposed ‘Smart Data Big Bang’ will develop new smart data schemes that will use open banking data sharing principles as a blueprint to accelerate its financial benefits to key economic sectors. These include home-buying, energy (utilities and fuel), transport, insurance and retail.

Not only will this deliver consumer choice, and cost savings, estimates suggest that wider data mobility could increase GDP by £27.8 billion annually. Data portability, through smart data, will be instrumental in unleashing this growth.

The success we have achieved so far is in no small part due to the collaboration of government, regulators, policymakers, innovators, industry groups, and stakeholders, all committed to realising the vision of a data-driven economy that serves the public interest. 

And there is little to stop it from achieving more: from delivering cost savings to the public sector and small firms, and offering consumers and first-time buyers opportunities to save and budget better, this financial innovation can continue to deliver benefits to UK citizens and organisations.

However, we must maintain this momentum to secure the long-lasting evolution of payment and data-sharing solutions to deliver a true public good.

Henk Van Hulle is CEO at Open Banking Ltd (OBL)

Main image courtesy of iStockPhoto.com