Partnership, not regulation, will unlock next phase of Open Banking

City Voices: There is now a clear choice about how to unlock the next chapter of innovation

Open banking has come a long way since it was first initiated, back in 2017, as part of a suite of measures to increase competition and innovation in financial services. Today open banking is a British success story that is being exported around the world. It is used by more than 7 million people and businesses to make an average of 8 million payments per month, fuelling a £4 billion boost to the economy.

Open banking payments are quickly becoming an alternative to card payments, which is particularly remarkable in a card-dominated market like the UK. They offer an instant, secure and cost-effective payment option for businesses. This comes at a time when the sky-high card fees which sellers face are being investigated by the Payment Systems Regulator.

It has been six years since regulation required banks to give customers easy and secure access to their accounts via open banking. There is now a clear choice about how to unlock the next chapter of innovation. Wait a few more years for new regulation to define what else open banking can do? Or work together in commercial partnership with banks to unlock this potential.

Open banking will power a new generation of digital payments. Working in partnership with banks to unlock these opportunities will create a sustainable future for financial services, where incentives are better aligned and we can focus on jointly providing excellent new services for consumers and businesses.

As an example, Variable recurring payments (VRP) are a new payment option that has the potential to be transformative: making payments for subscriptions, utilities, grocery shopping or donations instant, simpler and more secure. They provide a much-needed alternative to direct debit and card payments, giving consumers greater flexibility and control.

VRP is such a huge opportunity that even though banks haven’t been required by regulators to support VRP for this type of transaction, banks and payments networks like us are deciding to work together to build it anyway.

All major banks are actively working and balancing the right approach to VRP as a major opportunity to leverage the investment already made in open banking and as a key advantage in the race to delivering the best online payments experience.

TrueLayer is collaborating with several banks including NatWest on this. Through this work, it has become clear that to deliver the maximum benefits to businesses and consumers in a consistent way, agreement is needed at an industry level on how this payment type should work in practice.

Responding to this challenge, today TrueLayer has published an industry-first blueprint, setting out proposals for how some of the operational challenges of VRP can be addressed on areas such as liability, dispute resolution and risk management.

We’ll be speaking to the widest possible group of players across financial services on these proposals. We hope our framework will contribute to making this new payment method a success. We think further innovation built on partnership and collaboration will support the UK maintain and grow its status as a world leader in fintech.

Today, it’s more important than ever to maintain the spirit of progress and innovation that motivated the rise of open banking in the first place. It is only by working together and leading the way on new financial products – rather than waiting for regulation to catch up – that banks and fintechs can make this a reality.

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