The Financial Conduct Authority (FCA) and the Payments Systems Regulator (PSR) have unveiled the next steps for UK Open Banking.
At the heart of these planned steps is a new independent operator for variable recurring payments, a welcome announcement for stakeholders across the nation who were concerned about Visa’s account-to-account (A2A) scheme.
The independent operator will oversee how variable recurring payments are made, hoping to expand the live services available to utility companies, government and financial services firms.
Variable recurring payments, a new Open Banking product, aim to give consumers and businesses more flexibility in how they make and receive payments. They allows customers to set limits on payment amounts, either for a single transaction spread across a month, helping to prevent unexpected expenses.
TrueLayer, an Open Banking network, has been at the forefront of the technology’s rise. Recently the company contributed significantly to its adoption through a partnership with Ryanair in December.
Commenting on the recent announcement, Francesco Simoneschi, Co-founder and CEO of TrueLayer, said: “The FCA’s support for the development of an independent central operator, to drive forward Open Banking is a significant and commendable step towards fostering competition and innovation in the UK payments landscape.
“By championing an open, transparent – and most importantly, independent – operator, the FCA is ensuring that consumers and merchants will benefit from lower costs, greater choice, and more secure payments. This is a crucial move that not only supports the future of Pay by Bank, but also strengthens the UK’s position as a leader in digital financial services.”
In addition to the establishment of an independent operator, the two financial watchdogs have emphasised the need for more collaboration, which it believes has been the main ingredient to the UK’s success in Open Banking so far.
The FCA and PSR wrote: “It is critical that the collaboration seen in 2024 across the industry continues this year.
“We thank the industry for their continued support and engagement in the success of Open Banking so far and we will continue to work together constructively as we implement the next steps.
“The FCA and PSR will continue to work closely together, overseen by a joint steering committee.”
Background
Open Banking experienced significant growth in 2024, with over 24 million payments processed each month. UK e-commerce giants, like Ryanair, have embraced Pay by Bank to lower processing costs, shorten settlement times and reduce card fraud risks.
The UK has emerged as a leader in Open Banking, and with the current Labour government aiming to revive the economy, Open Banking technology is seen as vital to this effort – a statement emphasised in the National Payments Vision.
Many stakeholders felt that Visa’s launch of its own A2A payment scheme in the UK last year posed a threat to industry progress. The initiative was met with scepticism, with some viewing it as a conflict of interest.
Concerns included the potential undermining of Visa’s core card payments business and fears that Visa might hinder A2A adoption through high pricing or suboptimal customer experiences. This move was also seen as reinforcing the existing Visa and Mastercard duopoly in the payments sector.
This led to calls from the industry for the UK to launch an independent scheme, which would ensure Open Banking would continue to thrive and not rely upon the two US giants – a widespread worry in Europe due to the volatility of its current political term.