UK regulators have been urged to widen the scope of open banking to include a broader set of financial products, including unsecured loans and motor finance.
A new report from fintech body Innovate Finance and professional services firm Boston Consulting Group has said that the reach of the data-sharing technology needs to be enhanced “to bring open finance to fruition”.
Currently, only payment accounts and business lending products such as commercial credit cards and unsecured loans up to a value of £25,000 are included within the scope of open banking in the UK.
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The report urges regulators to broaden this to include products such as pensions, investment accounts, insurance, and other lending products such as unsecured lending, car loans, and mortgages.
“In the context of cost of living, Innovate Finance members have identified all savings, credit, and mortgages as top priorities where open finance could unlock additional tools to help consumers manage their finances,” the report said.
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“Because the scope of open banking is limited to certain types of accounts, imagine if the scope were enhanced to other usage data,” said John Natalizia, co-founder and chief executive, and Ken Donald, co-founder and chief operating officer at money management app Snoop, cited in the report.
“That data can then drive real-time analytics on risk, etcetera. Open finance is an expansion of any financial relationship in which you have to be scoped in the same way that payment products currently are: savings, pension, mortgage, investments, and any other vehicle where you have money, brought together in one place. Any product that impacts financial life would be part of open finance.”
The report made a number of recommendations to unlock the full potential of open finance. It called for the removal of hurdles on data retrieval from banks, including inconsistent or absent fields, poor availability, unplanned outages, noncommunication of planned outages to third party providers, inconsistent transaction IDs over time, and API request quotas.
It also urged for more inclusive and transparent governance, and a forward-looking perspective on policy.
“Open Banking has been a catalyst for innovation in the financial services sector,” said Janine Hirt, chief executive at Innovate Finance.
“This is especially the case in the UK where competition and market regulation has resulted in more empowered customers supported by a booming fintech ecosystem. As a result of its efforts, the world has looked to the UK as a pioneer and vanguard in open banking.
“However, the UK’s leadership is increasingly being challenged as other countries threaten to leapfrog the UK’s position as an early adopter. To maintain our global leadership, the UK must put open banking implementation systems on a permanent footing: fixing the glitches in the current approach, and building on this to extend open banking to other financial services (open finance) and beyond to other sectors.”
