Peer-to-peer lending platform Plend is among the voices calling for the government to update data rules to encourage wider uptake of open banking.
24 fintechs and industry bodies have signed an open letter to Paul Scully, minister for smart data and John Glen, economic secretary to the Treasury, advocating for a Smart Data Right in the 2022 Queen’s Speech.
Primary legislation for the Smart Data Right would give consumers a legal right to consent to port their data between firms in real time.
The signatories have also asked for the removal of the 90-day re-authentication requirement and more proactive enforcement by the Financial Conduct Authority (FCA).
The letter follows a report by policy group Coadec which warned that the UK risks falling behind other open banking regimes like Australia and South Korea.
Plend’s co-founder and chief executive Rob Pasco told Peer2Peer Finance News that open banking is core to his company’s mission.
“We believe in giving our customers control over their data to use as they see fit so that they can obtain the best product for them,” Pasco said.
“Right now payments and credit scoring are two of the main user cases for open banking – I would love to see an environment where other products, such as insurance data is also opened up to customer control in order to improve their access to fairly priced products.”
Pasco explained that while open banking adoption is increasing across the UK, there are some restrictions to the current regulation on the data being pulled, which limits providers like Plend when making decisions.
“One of the main issues we raised in the letter is the lack of quality of transaction data that banks provide, including key customer information that would assist with the know-your-customer (KYC) and anti-money-laundering (AML) checks that fintechs like Plend could take advantage of,” said Pasco.
“Aside from mandating that further data fields should be made available to open banking data providers, increased awareness plus a detailed roll-out plan for the future is key. Adoption requires the increase of trust and user cases, which is still at an early stage here in the UK.”
Coadec’s report warned that competition for the next fintech solutions is hotting up, adding that “neither regulators nor the government have laid out concrete plans for shoring up the UK regime, or expanding consumer data rights further”.
As a result of this delay, consumers can only share a small part of their data, and this could stifle innovation and personalisation in the fintech sector.
“We need a plan to expand open banking to cover more financial information,” the report said. “This plan must be principles based, appreciate the diversity of products across the sector, and also anticipate that data portability must go beyond finance to fulfil full consumer control and realise the potential of data exchange.”
The open letter was signed by Plend, Innovate Finance, Coadec, Monzo, Aire, Klarna, Butter, Chip, Wise, Plum, Revolut, Codat, Crezco, Plaid, Yapily, PensionBee, Youtility, Fronted, iSpent19, LoyalBe, Snoop, Tomato Pay, Untied and Truelayer.
“Open banking has fuelled financial innovation in the UK,” said Adam Jackson, director of policy at Innovate Finance.
“As adoption spreads in other countries, going further and faster on smart data would maintain the UK as a hotbed for innovation. A Smart Data Right, as called for in this letter and Coadec’s report, would be the best next step, maximising the possibilities of a smart data economy and putting consumers in control of their data.”
A consultation on the content of the Smart Data Right will be launched in Autumn 2021.