Natwest calls for greater commercial incentives to boost open banking take-up
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Natwest has called for a “step change” in the regulation of open banking as the sector moves towards the next stage of its life.
Citing research from consultancy firm Oxera, Natwest argued there should be greater commercial incentives for expanding the reach of open banking.
Claire Melling, head of bank of APIs at Natwest, said: “Banks, fintechs and regulators need to work together to design new, flexible frameworks and commercial incentives that will support a far wider range of Open Banking use cases.”
The report suggesting open banking has been a “qualified success”, pointing to the 7m people who have used it since its launch in 2018. However, payments using open banking are still dwarfed by traditional options.
“Open banking use cases are limited and have not yet entered daily or weekly usage for most consumers and businesses,” the report said.
Natwest argued that improving commercial incentives would encourage banks to develop open banking beyond the requirements set out in the initial open banking order.
As well as incentives, the report said banks should be mandated to offer a wider range of use cases, expanding the scope of open banking to require banks to provide necessary data via APIs for free.
The report also highlighted difficulties around fraud liabilities. Currently, banks incur the costs of fraud meaning third party providers have little incentive to reduce fraud risks.
Some in the sector suggested that regulators should focus more on fixing the problems that already exist in the sector before expanding.
Innovate Finance’s head of policy Adam Jackson said: “There are still some issues around performance reliability and speed of response from banks on open banking services including instant payments.”
He said regulators need to improve the service availability and performance of open banking APIs.
Coadec’s fintech policy lead Luke Kosky said “opaque and inconsistent transaction limits must be scrutinised more”.
The proposals come as regulators consult on the new shape of open banking regulation.
Open banking, which was first rolled out by regulators in 2017, forced dominant high street lenders to open up their customers’ data to third-party challengers.
The scheme entered a “new phase” in January this year after the six largest banks in the UK implemented the requirements of the open banking roadmap. In April, regulators announced a new long-term regulatory framework would be established to “unlock” open banking’s potential.
The industry is still consulting on what shape the new entity should take and how the sector should be regulated.