CMA9 may have slowed Open Banking adoption

The UK’s Open Banking initiative has suffered thanks to the number and scope of the institutions at its backbone, according to a panel of challenger banks and third party providers (TPP) at FinTech Connect in London last week.

The Competition and Markets Authority (CMA) created the Open Banking infrastructure in January 2018 with nine of the UK’s largest banks.

“It was the CMA9 that created the open banking ecosystem. If you think about Open Banking, they made the membership club nine banks, and thus the result and the outcome of what we’ve got today is sub-optimal,” said Richard Wagner, chief executive officer Cashplus, a digital bank alternative that provides current accounts, during the panel.

“I think actually what the [Open Banking Implementation Entity] did was advanced. What we did wrong in the UK was allowing the nine big banks – who really don’t want to move – actually control the ecosystem and such that actually defined the end date, which I think we’re going to see the legacy of for many years to come.”

Paul Clark, chief technology officer at Tandem Bank, agreed.

“If there was money in this for the big banks, they would have done it. They’re not stupid – they’re full of intelligent people, they all know how to make money – the fact they were forced to do it suggests there is no money in it. They’re dragging their heels.”

A spokesperson for Vibe Tickets, a TPP, said CMA9 banks have been slow to adopt TPPs under Open Banking, citing the delay in adopting her own company.

“One of the reasons it took so long was to actually integrate the nine primary banks. So it took a while, some of them were faster than others, but they’ve been quite problematic I have to say,” she said.

“We are competitors … they don’t want to show that side of their business. And their systems are quite obsolete, so maybe they can’t move as fast as they want to.”

The Open Banking initiative commenced in January 2018 in the UK, alongside the implementation of the EU’s second payments services directive (PSD2). The UK’s CMA issued the directive, creating the Open Banking Implementation Entity (OBIE) to create software standards and industry guidelines. The original January 2018 deadline for adoption was moved forward to September 2019 to accommodate lagging banks.

“A key principle of the CMA order is that the OBIE is independent of the CMA9,” said an OBIE spokesperson in an email.

“Our Steering Group includes representatives from across the banking sector and includes various challenger and Fintech representatives. 2019 saw large-scale up-take and use of Open Banking technology by a wide variety of third-party providers and we are looking forward to seeing even greater integration of financial institutions of all types and sizes into the Open Banking ecosystem.”

As of the end of November, there are 198 regulated providers in the Open Banking ecosystem, according to the OBIE in an email. The entity has yet to put a number on how many they expect to enter in 2020. Despite growing numbers, a report commissioned by the OBIE dated July 19 noted that PSD2 compliance has hindered the uptake of Open Banking.

Apart from the UK’s nine retail banks that make up the CMA9 – RBS Group, Barclays Bank, HSBC Group, Lloyd’s Group, Nationwide, Danske Bank, Bank of Ireland, and Allied Irish – challenger banks such as Tandem Bank, Starling Bank, and Monzo have opted into the initiative.

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