OPEN Banking has kick-started an ecosystem of digital innovation even though implementation has not yet been completed, according to a new report from the Open Banking Implementation Entity (OBIE).
The report notes the firm foundations upon which Open Banking has been built, but said further improvements need to be made if it is to become a cornerstone of the digital economy.
Amongst the recommended improvements are additional payment capabilities and refund functionality, development of premium application programming interfaces (API), and improving consent protections for consumers.
Read more: Open Banking set for 2019 surge
“This report clearly demonstrates how far the Open Banking initiative has progressed, and the potential that exists to help create a banking market that better serves consumers and small businesses,” trustee of the OBIE, Imran Gulamhuseinwala OBE, said.
“Nonetheless, [the Second Payment Services Directive] is not a complete solution and we need to further develop the standards if Open Banking is to fully meet its objectives. Open Banking has the potential to become a cornerstone of the digital economy by contributing to other sectors and components of digital identity.”
Regarding payment capabilities and refund functionality, the OBIE recommends the ability for customers to pre-approve payments, for example for subscription services, rather than handing card details over to merchants to hold on file.
In terms of improving consent protection for customers, the OBIE said that existing rules provide protections but can be improved with additional consumer data protection and ease of use.
The OBIE is planning to create what it calls “premium APIs” that would sit above the mandatory “Regulatory APIs”, which would provide a commercial incentive for banks to grow the Open Banking ecosystem and to improve the performance of their APIs.
Other recommendations the OBIE made in the report include expanding Open Banking into Open Finance. The narrow focus of the Open Banking APIs limits their potential to drive wider competition in the financial sector, such as in cash savings, mortgages, pensions and insurance, the report stated.
The Financial Conduct Authority is planning to consult on Open Finance “imminently”, the report said.
Read more: Leading the way
“Open Banking has the potential to transform how we manage our finances, giving people more information and control over their money than ever before,” economic secretary to the Treasury, John Glen MP, said.
“Many firms are already using this to build innovative products which offer accessible financial advice and enhanced credit assessments.
“Open Banking will create a more dynamic and competitive banking sector that is more inclusive and effective.”