Britain’s competition watchdog wants a new independent banking industry body to accelerate take-up of “open banking” apps to spawn new fintech companies and offer more choice to consumers.
Open banking allows third-party internet based applications to compete with big banks by accessing a customer’s accounts to make payments, or find better deals on loans and other services and products.
The Competition and Markets Authority on Friday launched a public consultation until the end of March on strengthening how the financial sector operates open banking and ensures sufficient competition.
Open banking has made a “good start” with hundreds of apps now available and around 450 firms in the pipeline, the CMA said.
“While the largest banks have shown signs of embracing open banking, they may also have an incentive to slow the further development of the open banking ecosystem, where this conflicts with their own commercial objectives,” the CMA said.
HSBC, Lloyds, NatWest and Barclays continue to dominate high street banking, and the CMA wants the new industry body to push forward open banking.
It would replace the Open Banking Implementation Entity or OBIE, an interim body funded by big banks and led by a trustee Imran Gulamhuseinwala.
“Open banking has been critical to supporting the UK’s emerging and growing fintech industry,” Gulamhuseinwala said.
UK Finance, which represents Britain’s banks, has put forward a blueprint for a not-for-profit company, but the CMA said there was a risk of big banks having an “inappropriate” influence over the new body’s chair.
An “independent and vigorous” chair was needed to oversee a period of growth and not “quiet consolidation”, the CMA said.
There are over three million users of open banking apps in Britain, with new users being added at the rate of a million every six months. Usage is expected to increase further as the government uses it to collect tax from companies.
Many of the apps are provided by fintechs, a critical growth sector for the government as it seeks to bolster the City of London’s global attraction after being cut off from the European Union by Brexit.