Pressure mounts on banks for open banking funding

£10m is required for regulators charged with developing tools to prevent financial crime and save consumers.

Banks are facing increased pressure to provide interim funding for Open Banking Limited (OPL), the organization responsible for overseeing innovation in the open banking sector. 

Regulators, including the Financial Conduct Authority (FCA), are urging banks to contribute millions of pounds to prevent financial crime and protect consumers in case of emergencies.

Call for Interim Funding

The FCA summoned over 40 City firms, including major banks like NatWest, HSBC, Lloyds, and Santander UK, to discuss providing financial support to OPL. 

The Treasury and regulators are seeking £10 million in total, with nearly a third of the sum required by April 1, 2024. The urgency of the funding is emphasized to extend OPL’s operations until legislation establishes a new supervisory entity for the sector.

Background on Open Banking

Open banking, launched in 2018, aimed to diversify the financial services landscape by allowing individuals to share their financial data with startups and fintech firms. While it promised better deals on products like mortgages and loans, concerns about data breaches and scams accompanied its implementation.

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Expectations and Contributions

Banks have been asked to contribute approximately £70,000 to £100,000 each, with hopes that around 30 firms will provide funding. 

The funds are intended to support OPL’s work, mitigate fraud risks, and ensure effective consumer protection. Regulators stress that a lack of funding would hinder the progress of open banking in the UK, delaying the realization of its benefits.

Relief for Larger Banks

Larger banks express relief that smaller counterparts are also asked to contribute to funding. Previously, only nine lenders were responsible for financing OPL entirely, making the burden more equitable across the industry.

Looking Ahead

As banks weigh the proposals and consider their contributions, the outcome will determine the future trajectory of open banking in the UK. 

Regulators emphasize the importance of financial support to realize the full potential of open banking for the benefit of all stakeholders.