The Financial Services Consumer Panel has responded to the Joint Regulatory Oversight Committee’s (JROC) proposals for the design of the Future Entity of UK Open Banking (the Future Entity). The Panel recognised a variety of risks posed by the Future Entity, including:
- Lenders could use open banking data to aggressively or inconsiderately take repayments from consumers, leaving them unable to meet essential living costs.
- Firms could misuse open banking data, and the strong insight it gives into consumer behaviour, to target unsuitable products at consumers.
- If firms do not have adequate protections, criminals may exploit this to steal highly valuable open banking data and thus expose consumers to harm.
However, the Panel recognised that open banking as the potential to benefit consumers and SMEs by giving them greater access to their financial data and improving competition in product and service offerings. To gain the benefits of open banking whilst mitigating against its risks, the Panel suggested:
- The primary aim of the Future Entity should be to promote competition and improve innovation to the benefit of customers and businesses, with benefits to the UK economy being secondary to this.
- Consumers and SMEs must be properly represented at each level of governance and decision making. Dedicated stakeholder arrangements should be set up to ensure consistent consumer input and support director representation on the Board.
- Chairs of the Future Entity should be independent to ensure balanced discussions.
- The FCA should have oversight of the Future Entity to enable it to intervene and take remedial action if objectives are not being met.
- Levy funding should be considered to avoid industry capture which will happen if it is funded entirely by open banking practitioners.
- There should be protections and redress mechanisms, including protection of funds in flight and on receipt, and deposit risk.
- The Future Entity should be run as a not-for-profit.