There is currently significant work being undertaken in the UK on Open Banking and the use of Application Programming Interfaces or APIs in financial services.
This is due to high profile industry-led initiatives such as the Open Banking Working Group (OBWG), legislative developments, such as PSD2 and regulatory activity, such as the CMA's retail banking investigation and remedies.
An API contains a standardised set of requirements that govern how one software application can talk to another. The use of APIs and Open Banking will allow customers to use and share their data securely with third parties to enable them to better manage their financial affairs and compare different products. The requirement for banks and other payment service providers (subject to consent from account holders) to provide access to their customer data and payments capabilities is expected to revolutionise financial services.
However, the use of APIs to support Open Banking is complex from a regulatory perspective because there are multiple initiatives underway, differing timeframes and regulatory requirements that are still to be finalised.
The API initiatives both in the UK and EU continue to evolve independently of each other although there is an acknowledgment from those involved, and lobbying from the industry, that there needs to be a co-ordinated approach. The scope, governance and proposed timeframes for the various initiatives and regulatory changes are tricky for firms to currently navigate, particularly in relation to identifying which of their products will be subject to open access requirements, what information they must provide, to whom and when. We have prepared a short high level summary of the requirements under PSD2, the CMA's retail banking remedy on Open Banking, and the OBWG's recommendations.