Market participants, lawyers and the European Banking Authority (EBA) are still pondering the impact of Open Banking more than a year into the initiative, a conference in central London heard this week.
“It’s too early to judge at this point in time,” said Adam Farkas, executive director of the EBA at the Innovate Finance Global Summit, adding that the near future would see a lot of teething pain with the need to “provide clarity both on the regulatory side as well as industry”.
Farkas’ comments come at a time when the industry is struggling to fulfil Open Banking products without further guidance from the EBA, according to Emily Reid, the head of fintech and innovation at law firm Hogan Lovells, which has visibility on Open Banking “from the smallest fintechs to the biggest banks,” she said.
“What we see is a great deal of work still trying to understand exactly what the regulations say and require – you can’t build a product until that’s clear” Reid said on the same panel, “I don’t think anyone in this room would say that the regulations are as clear as they’d like.
“From the fintechs’ side, it’s ‘why can’t we have access?’, and from the banks’ side, it’s ‘I’m sure we should but are we allowed to give access to this type of account?’,” said Reid.
But the EBA’s Farkas promises greater clarity and a brighter near future.
“The mid-term expectation is much brighter,” said Farkas. “We expect a genuinely better quality service for consumers in the payments market. We expect increased competition which has already been seen and is very visible as well as security and choice for the consumer.
“We expect that the regulatory landscape works out what is regulated, who is regulated and how it is regulated, it’s going to be a lot clearer than before,” he said.
Also on the panel, Imran Gulamhuseinwala, the Trustee of the Open Banking Implementation Entity (OBIE), charged by the Competition and Markets Authority (CMA) to deliver the initiative, believes it’s a case of learning to walk before you can run.
“While PSD2 is fundamentally an important catalyst making this happen, it’s not from my perspective the end in and of itself,” he said,”it’s important to go back to the reason why. The first is that control of data is a consumer right, allowing consumers and SMEs can take back control to access beter services.
“The second is that there are many products and services that don’t work very well. While Open Banking won’t solve them by itself, it is an enabling technology for innovators. An example would be, the several millions of people who can’t have access to a bank account, those with thin credit files. All of that put together is what the promise of Open Banking needs to deliver against. It will take some time,” said Gulamhuseinwala.
“Frankly, it’s too early to tell with consumer uptake,” said Gulamhuseinwala. “We’re not going public with the number of calls on APIs because it’s complicated and we want to be very confident that we have numbers that are trustworthy. I certainly feel we’ll publish these in a matter of months, but the numbers we are seeing are material and are growing.”
Farkas said that the EBA did not have the resources available to measure the impact of Open Banking.
“We do not have the resources at this stage to do that. What we are doing is engaging with a lot of customer organisations regularly which allows us to have feedback,” he said.