The UK’s Open Banking regulators have failed to hold banks accountable to the Open Banking initiative, says Shefali Roy, chief compliance officer of TrueLayer and former CCO at Stripe.
"Like human beings, when you are forced to do something, you really don't want to do it. They [the banks] have now come to the party in the sense that they realise that they have to do it. I think the blowback hasn’t been great in the sense that the OBIE, which has a role to play to pull the banks into order hasn’t done a good enough job. They’ve done fine, they’ve done OK, but if we are now in November, this was meant to be ready in January,” says Roy.
“We are looking at version two and version three of the specs next year. We are looking at September 2019 where the banks must be compliant with Regulatory Technical Standards (RTS), European Banking Authority standards.
“If they are not ready 12 months later, on a standard that they should have been ready with in January, I question whether they will be ready for September next year. I question whether the quality of the APIs that the banks have been developing have been fantastic.”
However, according to Roy, there remains ambiguity as to where the responsibility of keeping the banks in check truly lies – whether it is the OBIE or the CMA.
“My impression was that the CMA issued an order and the order was, ‘hello banks please open up your data and make sure you build these technical APIs which are all compliant.’ The OBIE for all I know is an independent entity charged with fulfilling the CMA order,” says Roy.
“For us next year, we are going to need clarity on all of these things, if banks are not being held accountable.”
The Competition and Markets Authority (CMA) established the OBIE as an independent body “to develop and deliver the open and common banking standards for APIs, and to work with the industry to implement and maintain those Standards.”
The Open Banking initiative was a result of the retail banking market investigation order 2017, which was conducted to remedy problems in both personal current account and small-medium enterprise banking markets.
The OBIE is funded by the UK’s nine largest current account providers. The CMA, the Financial Conduct Authority (FCA) and Her Majesty’s Treasury (HMT) have observer roles on the Steering Group of OBIE.
Heading up OBIE is trustee Imran Gulamhuseinwala. Gulamhuseinwala is seconded to Open Banking on a part-time basis from Ernst & Young, where he holds the position of global head of fintech.
If a bank fails to meet a deadline the CMA has set them or fails to undertake any form of conduct specified in an order, both the CMA and OBIE trustee can issue directions. In the case that a bank still fails to comply with these directions after further additional measures have been put in place, the CMA can take action through the courts.
In December of last year, the CMA provided direction and updated implementation dates to six banks that were going to miss the January 13 deadline for the rollout of Open Banking.
Since then four banks have had those directions revoked throughout the year, and on December 12 Bank of Ireland joined the list.
“Bank of Ireland agreed a revised implementation plan with the CMA in respect of the delivery of release 1 of Open Banking, and as a result of the bank completing that timetable to the satisfaction of the CMA, the directions have now been revoked,” said a Bank of Ireland spokesperson.
For Roy, this raises the question as to why there haven’t been repercussions for those who are failing to comply.
“You [the banks] have been made to do this because there has been a CMA order, get it done. There is a court regulatory order to say open your APIs, open your data, OBIE was charged with making sure those technical specs were complied with, they haven’t been.
“What’s the pushback? What are the repercussions of banks not being compliant? I don’t see anything.”
In response to Roy’s comments, an OBIE spokesperson gave the following statement:
“Two years ago, Open Banking was regarded by many as a typical compliance exercise championed only by a handful of fintechs - more tech spends driven by compliance, rather than business case or customer need. However, we are only mid-way through our roadmap, yet we are already beginning to witness the emergence of a vibrant, dynamic and rapidly developing ecosystem, which is rapidly becoming more sophisticated and expansive in its coverage.
“We expect the ecosystem to develop with even greater momentum throughout 2019 not least as we see greater conformance with the implementation of the standards as well as greater innovation in the market.
“Today there are real customers benefiting from real services; mass adoption is just a matter of time in the UK. We are leading the world in Open Banking, and, with the growing recognition that our standards are extensible, we are witnessing significant interest in the potential deployment of our standards in other markets.”
Loss of customers has contributed to banks not being prepared for Open Banking, according to Roy.
“I don’t think banks have been ready because they have been losing customers. Banks have not been ready, whether it is deliberate or there is bureaucracy, or… it’s the business and the management I think that has been the hurdle,” she says.
“They [the banks] had to develop APIs, and the APIs are not great, they aren’t fully compliant, and the technical implications are huge because if the banks are not ready, it doesn’t matter what API we pull from the banks. If their technology is not complete and deficient, the downstream is pretty bad too. What we build, which is compliant to the banks, and meeting the banks API to pass that down to our customers and applications will also be deficient, because the banks have just not done a good enough job.”
According to an OBIE report, in the month of October 2018, 293,566 of API calls to account providers failed. The accounts were at banks such as HSBC, Lloyds, Nationwide, Barclays, and several others.
However, banks that failed to see the long-term impact of Open Banking are now rushing to create their own Open Banking product, says Roy.
“There are now tangible effects of banks losing business because of Open Banking, and we have a handful of banks who we work with technically, but also we have a handful of banks now who have asked us to participate in their Request For Proposals (RFPs) because they are realising that Open Banking is here to stay.
“They are late to the party to develop their own products which are OB compliant, and so we are now in three RFPs with high street banks in the UK to help them develop an OB product. That’s because they have realised that they are late, and it’s a join them rather than beat them kind of thing.”