Until now, Open Banking in the UK has been governed by the Competitions Market Authority (CMA) with help from the OBIE (Open Banking Implementation Entity) which ensured the participation of the CMA9 (the UK’s 9 largest banks).
But now it’s time for the next phase of Open Banking, which means there may be a new entity in charge and new plans for Variable Recurring Payments (VRPs).
What happens next with Open Banking?
The original Open Banking roadmap – the deliverables required by the CMA – was completed in January 2023 when VRPs were enabled for sweeping (me-to-me payments).
At this point, the CMA9 banks felt that they had completed their responsibilities regarding the roadmap.
The Open Banking industry was then left pondering questions about what the future might look like.
- Is the natural extension to Open Finance guaranteed?
- Would Payment Initiation be enhanced to capture wider recurring payment use cases?
- And would the UK’s first-mover advantage in the Open Banking space be lost?
Nuapay and others operating in the Open Banking space needed these questions answered, and JROC may have just got the ball rolling enough to achieve that with their latest report.
What is JROC?
The Joint Regulatory Oversight Committee (JROC) is a committee consisting of the two lead regulators – PSR (Payment Systems Regulator) and FCA (Financial Conduct Authority) – but it also includes the UK Treasury and CMA.
JROC has updated their roadmap via its recommendations for the next phase of Open Banking in the UK. It is a 2-year roadmap with 29 individual actions. We have summarised the key highlights below.
Highlights from the report.
Here are the aims of the JROC report, which will be pursued over the next 2 years:
“In addition to our immediate priority of establishing an economically sustainable future entity with effective governance – and to allow open banking to continue to develop ahead of the long-term regulatory framework being implemented – we have identified five themes that will be progressed in the next two years:
- Levelling up availability and performance
- Mitigating the risks of financial crime
- Ensuring effective consumer protection if something goes wrong
- Improving information flows to TPPs and end users
- Promoting additional services, using non-sweeping variable recurring payments as a pilot
Source: Joint Regulatory Oversight Committee (JROC) report
How does this change payments in the UK?
The outcome of the report sets out ambitious aims for the future of payments.
The aim of JROC and the future entity (the equivalent of the OBIE) is now to enable Open Banking payments to act as an alternative to card payments.
It also specifically names retail payments as part of that ambition. This will be important for Third-Party-Payment (TPP) providers like Nuapay as we continue to develop product updates for consumer and SME payments.
The future of VRPs
This report can also be used as a springboard to achieve a viable version of VRPs.
In fact, it has already sparked positive discussions on the topic of VRPs which Dawn Beeby, Sales Director of Nuapay participated in (watch it here).
Creating premium APIs (like VRPs) is an option that aligns with JROC’s vision for delivering ecosystem sustainability. However there remains much debate about the commercial model the banks will apply for VRP and whether it will be viable, so the alternative of using s Open Banking paired with Direct Debits seems to be gaining increased traction.
Creating premium APIs (like VRPs) is an option that aligns with JROC’s vision for delivering ecosystem sustainability. However, it will still only be one option available when non-sweeping VRPs are ready for customers to use.
Nuapay believes that the JROC report is a positive step in the right direction.
However, as it stands, sweeping VRPs do not go far enough for users, and commercial VRPs have only partly been rolled out by one UK bank for a small use case. This means sweeping VRPs are not ready yet and may take some time to get here.
The same outcome can only be achieved in the UK effectively with Authenticated Mandates.
The award-winning payment method offered by Nuapay is the best combination of Open Banking and Direct Debits available right now. If you would like to learn more, do not hesitate to get in touch with us here.
The next phase of Open Banking may take time, but we will be here to provide you with further updates along the way.