Document co-authored by FDATA Europe and ETTPA. Download here.
Fintech bodies call for National Regulators to work with industry to prioritise customer needs ahead of other regulatory factors
The Financial Data and Technology Association (FDATA Europe), in association with the European Third Party Providers Association (ETTPA), has highlighted a material risk to individual and business consumers in the next phase of the implementation of the Regulatory and Technical Standards (RTS) of the EU’s second Payment Services Directive (PSD2).
ETPPA and FDATA Europe, whilst fully supportive of PSD2, have identified a series of unintended consequences of the RTS, which will cause widespread disruption to consumers and businesses which use the services of many fintech applications. Notable examples include the impact on the many millions of businesses that use SME accountancy services such as Xero, Quickbooks and FreeAgent, unless steps are now taken.
The simultaneous attempt to encourage innovation and to introduce new payment security measures is at the root of these unintended consequences, including the deterioration of existing consumer services, the introduction of security risks to banks, interruption to retail card and bank transfer payments, and significant disruption to Fintech firms who use open finance in their business models.
Whilst the RTS has had many intricate technical challenges, with lobbying and counter lobbying between banks and fintech firms, the customer disruption issues are becoming increasingly clear, and all sides now need to work together to manage these interlocking challenges, reduce the disruption and buy some time to work on resolving the outstanding issues.
The key issues are summarised as follows
- Strong Customer Authentication, designed to improve the security between a bank and its customer, will unintentionally block access to non payments data, such as savings accounts and loan accounts, which are in very wide use
- The RTS provides no period of transition during which a TPP could seek to ask its customers to rejoin on the new technology. There needs to be a twelve month transition period after the banks have delivered a high quality API or Adjusted Interface to allow customers to migrate
- It is already crystal clear that the development of the technologies is not nearly mature enough at this stage, both in functionality and resilience. It is highly likely that on the current time table, the vast majority of banks will fail to deliver a suitable API and run out of time to then deliver the Adjusted Interface. If they simultaneously then introduce the new security measures, all access to account channels used by Fintech firms will be blocked.
FDATA and the ETTPA have suggested a new order which prioritises the needs of customers through a series of technical and practical measures.
Commenting, FDATA’s Chairman Gavin Littlejohn said:
“Open finance is the biggest and most important innovation in the financial services sector since the dawn of the internet. Customers have grown accustomed to innovative market and payment solutions that improve convenience and value. PSD2 is an important first step in creating a better framework of customer rights and protections to protect this new market.
“We have made a series of practical suggestions and we are confident both in their ability to reduce the risk, and in the good will of the EC and EBA to encourage markets to develop solutions.
“As it stands the banks, fintech firms and national regulators need to orchestrate a hierarchy of needs which puts customers first. A practical first step would be to delay any new implementation of Strong Customer Authentication which could block the traditional technology from functioning as it currently does, until such a time as the key issues are properly managed. Creating a ‘big bang’ approach to implementation, regardless of the connected circumstances, is simply creating an unnecessary cliff edge, which is easily avoided by this simple measure.
Commenting, ETPPA’s Chairman Arturo Gonzalez MacDowell said:
“During such a fast pace of change unintended consequences are always a potential difficulty.
“This is not about allocating blame – everyone is facing the right way and trying to do the right thing. But we do need to take action, and there is very little time to reduce the risk present in this next phase of implementation. We need real leadership now to navigate a path to avoid the regulations accidentally disrupting the markets they were designed to nurture.”
NOTES TO EDITORS
- The Financial Data and Technology Association (FDATA) was established in Europe to advocate for Open Banking in 2013, during the negotiations to add account aggregation to PSD2. and then formally incorporated in 2014. It is a member organisation, is not-for-profit and has a charter to develop open secure market access to innovation across all financial verticals, including payments and payments data, but also loans, mortgages, savings, investments, pensions and insurance. Customer access to these financial verticals via Third Party Providers is described collectively as Open Finance.
- The European Third Party Providers Association (ETPPA) is the European trade association of bank-independent PSD2 TPPs. ETPPA is an international not-for-profit association (IVZW/AISBL) organised under Belgian law. ETPPA formalises the former Future of European Fintech (FoEF) coalition, which was created ad-hoc at the beginning of 2017 to represent the interests of TPPs in the negotiations around the PSD2 RTS on SCA & CSC. ETPPA represents the bank-independent TPP interests in the implementation and evolution of PSD2 and RTS vis-a-vis the national and EU authorities and other stakeholders.
- FDATA and the ETTPA have jointly authored a paper – The Unintended Consequences of PSD2 RTS – which has been presented to the regulatory authorities in the EU and the UK.
- Media – for more information contact Andy Maciver (+44 7855 261 244, email@example.com)
Across the world, governments, regulators, banks and fintechs are talking about open banking, and also trying to follow the progress and success of UK Open Banking. They sense excitement, threat and opportunity, and there is much talk about innovation, security, standards and risk.
But are we all talking about the same thing? What is ‘open banking’?
Click below to see FDATA Europe’s response to the Financial Conduct Authority’s Consultation paper 18/25 – Approach to final Regulatory Technical Standards and EBA guidelines under the revised Payment Services Directive (PSD2).
Click below to see FDATA Europe’s members’ feedback on the EBA Draft Guidelines on the conditions to be met to benefit from an exemption from contingency measures under Article 33(6) of Regulation (EU) 2018/389 (RTS on SCA & CSC).
FDATA has been named as a media partner for the 2nd UK Robo Advice and Digital Wealth Summit.
The digital transformation of the financial services industry is continuing apace, and robo-advice and digital wealth management are a fast-growing part of this digital transformation. Originally conceived as a means of extending financial advice to the mass market, the technology’s real potential lies in its use being extended to insurance, pensions and other sectors. As robo-advice matures and expands from innovative start-ups to incumbents who are increasingly adopting or integrating the technology into their business models, having a clear perspective, not only of how the market is developing and where the opportunities will lie in the future, but also of regulatory expectations, will become increasingly critical. The latter point is particularly relevant given the FCA’s recent, multi-firm review of automated investment services.
Attendance at the second edition of the UK Robo Advice and Digital Wealth Summit, which is to take place on 20th September in London, will therefore be invaluable for both incumbents and start-ups that want to know how to adjust their business models to take full advantage of the significant opportunities presented by robo-advice and digital wealth management. This year’s conference will also involve a keynote address by the FCA’s Anna Wallace among many other high-level speakers.
Key discussion areas include:
- Robo-advice: progress so far and opportunities ahead
- Meeting the developing expectations of regulators
- Robo-advice in the UK: a country specific perspective
- Customer acquisition and engagement
- Increasing the granularity and quality of advice
- Outlook for robo-advice in the pension and insurance sectors
- Robo-advice from two different angles: established financial institutions and fintech start-ups
Anna Wallace, Head of Department, Innovate, Financial Conduct Authority
Helena Morrissey DBE, Head of Personal Investing, Legal & General Investment Management
John Barrass, Deputy Chief Executive, PIMFA
Giovanni Dapra, Co-Founder and Chief Executive Officer, Moneyfarm
Andrew Firth, Chief Executive, Wealth Wizards
Adam French, Co-founder & Director, Scalable Capital
Michael Gruener, Managing Director & Head of EMEA Retail Business, BlackRock
Jack Knight, Deputy Chief Executive, Investment Association
Tomasz Krzywicki, General Counsel (Europe & US), Wealthsimple
Hemal Mehta, Founder and Chief Executive, AtomInvest
Janine Menasakanian, Head of Distribution Strategy, Personal Investing, Legal & General Investment Management
Kevin Mountford, Chief Executive, Raisin UK
Uday Nimmakayala, Chief Executive, WealthObjects
Joe Parkin, Head of Wealth and Retail – UK, Ireland and the Channel Islands, iShare
Darren Philp, Head of Policy, Smart Pension
Romi Savova, Chief Executive, Pension Bee
Joe Seunghyun Cho, Co-founder and Founding CEO of LATTICE80, Chairman at Marvelstone Group
David Stevens, Life Advice Director, LV=
Daniel Tammas-Hasting, Managing Director and Founder, RiskSave
Daniel Thomson, Digital Product Owner – Retail Investments, Lloyds Banking Group
Christopher Truce, Head of FinTech, Saxo Bank Group
Caroline Vaughan, Head Of New Business, Innovate Finance
Delegate fee: £595 + VAT
Small company and Fintech rate £199 + VAT
This report catalogues some of the technical challenges encountered by Third Party Providers (TPPs) during their initial connections with the Open Banking Directory and in particular thereafter with the API connections identified in a technical workshop organised by FDATA .
FDATA, together with the Electronic Money Association, techUK and UK Finance, have published a set of voluntary guidelines and encouraged market behaviours under PSD2 in the ‘transitional period’. You can download them below.
This paper sets out a number of amendments to the Proposed Amendments to the Agreed Arrangements to fulfil the objectives of the Retail Banking Market Investigation Order 2017.
Open Banking Standards to Expand Functionality and Cover all PSD2 Products
The Open Banking Implementation Entity (OBIE), the body set up by the Competition & Markets Authority (CMA) to enable a new, secure way for customers to take control of their financial data and share it with organisations other than their banks, today announces a series of important enhancements to its original scope as set out in the CMA Order (published in August 2016).
As referenced in the Chancellor of the Exchequer’s Autumn Budget today, the OBIE has now been asked by the CMA9 and Her Majesty’s Treasury to create open banking standards for all payment account types covered by the European Union’s second Payments Services Directive (PSD2). This means customers using credit cards, e-wallets and prepaid cards will also be able to take advantage of open banking services. In parallel, the CMA has today approved amendments to the agreed arrangements under the CMA Order, to include a programme of enhancements to ensure that Open Banking delivers maximum benefits for retail customers and SMEs.
The Open Banking project was created in 2016 by the CMA to bring competition and innovation to the personal and small business current account markets. The CMA mandated the nine largest current account providers in Great Britain and Northern Ireland (the ‘CMA9’) to create the OBIE and work with it to build a common set of API standards that would allow regulated companies safe and secure access to their accounts with the explicit permission of the customer.
The enhancements announced today will build on the core requirements of the CMA Order, which come into force in January 2018, and form a programme of releases throughout 2018 and into 2019.
Imran Gulamhuseinwala, Trustee of the OBIE, said:
“This is a truly innovative project and the UK is leading the world in opening up the banking system to new services and, ultimately, re-shaping it around the customer. Key to any innovation is the process of discovery and it became clear through the second half of 2017 that there is much more the OBIE could do to drive adoption of Open Banking and create a richer environment for new services. These enhancements should give even greater confidence to the FinTech community to seize the opportunity to participate fully in the financial services ecosystem.
“They will create standards for future dated, recurring and international payments as well as all the payment and product types covered by PSD2. These enhancements will maximise the benefits of open banking services for the customer. The OBIE will continue to work with the CMA, HMT, CMA9 and other stakeholders to drive this forward.”
Adam Land, Senior Director at the CMA, commented:
“Today’s announcement is a major milestone in the delivery of open banking, which will transform UK banking for retail customers and small businesses. This will make it easier for customers to manage their money, find the best deal for their needs and avoid overdraft charges.
“There is huge interest globally in the way that UK regulators have worked together with the banking industry, the FinTech sector, consumer groups and others to drive this project forward at pace. This plan, which the CMA has approved today, is both deliverable and bold in scope.”
The full details of the enhancements will be made available today on the Open Banking website which can be accessed here.
A copy of the CMA’s Notice of approval of changes to the Agreed Timetable and Project Plan will be made available today on the CMA website which can be accessed here: https://www.gov.uk/cma-cases/review-of-banking-for-small-and-medium-sized-businesses-smes-in-the-uk.