VRPs and future oversight of the CMA’s Open Banking remedies

This month saw NatWest Group partner with three open banking payment providers, TrueLayer, GoCardless and Crezco, to offer Variable Recurring Payments (VRPs) as a regular payment option to customers, going beyond the basic Competition and Markets Authority (CMA) requirement to implement VRPs for sweeping.

As the initial implementation phase of the CMA’s Open Banking remedies comes to an end at the end of this year, Open Banking continues to make strides in its mission to enable customers to gain access to new and innovative products to manage their finances more easily and efficiently. Moreover, the willingness of banks to go beyond the requirements mandated by the CMA is ultimately likely to bolster the attractiveness of Open Banking-powered products to the end customer and encourage more wide-scale adoption.

As we discussed in our recent article (available here), VRPs are just one of several action items set out in the OBIE’s Roadmap for the implementation of Open Banking. However, the OBIE’s role will come to an end as the CMA looks to transition the OBIE’s functions to a suitable successor body (the future entity) once the CMA agrees the initial Roadmap has been completed.

We look take a look here at the background to the initial Roadmap and the CMA’s recent response to its consultation on the future oversight of Open Banking.

Background to the consultation

Back in 2016 the CMA carried out a market investigation into the retail banking market for personal current accounts, business current accounts and SME lending which resulted in the Retail Banking Market Investigation Order 2017 (Order) and the CMA’s subsequent Open Banking remedies. The OBIE then, in consultation with the CMA, created a project plan and timetable (the Roadmap) which provided a framework for the implementation of Open Banking[1].

The actions set out in the Roadmap for the Implementation of Open Banking, have now nearly all been implemented by the banking industry. In anticipation of the conclusion of this implementation phase, in March 2021 the CMA undertook a consultation on the future oversight of the CMA’s Open Banking remedies. The CMA's response to the consultation was published in March of this year.

Key takeaways from the CMA’s response

  • The future entity and successor to the OBIE, will be responsible for further developing Open Banking and will playing a central role considering new capabilities and functions of Open Banking to support the continued growth of open API propositions in the interests of all end-users and industry participants.
  • A long-term regulatory framework will be put in place for Open Banking and the future entity will continue to develop Open Banking within this framework. The future entity will continue to be subject to effective regulatory scrutiny to ensure that it acts in a fair and independent manner to benefit consumers, businesses, and the wider economy. This regulatory oversight will not be led by the CMA, but led by the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR).
  • There will be an interim period between the completion of the implementation phase of the Open Banking remedy and the establishment of a long-term regulatory framework. To ensure that the future entity is subject to appropriate regulatory oversight during this interim period, the CMA have published a joint statement with HM Treasury, the FCA and the PSR to set out our plan to establish a Joint Regulatory Oversight Committee to oversee the development of Open Banking beyond the scope of the Order.
  • The CMA highlights that Open Banking has wider potential benefits in applying Open Banking beyond retail banking, including driving competition in payments and the broader financial sector through Open Finance.

If you require further information or have any further questions, please contact our FinTech team

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[1] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/885537/Notice_of_proposed_changes_to_the_open_banking_roadmap_-_web_publication_-_cma_gov_uk_---_May_2020_-.pdf

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