The Future of Open Banking: FCA Feedback and Industry Impact

The Financial Conduct Authority ("FCA"), the financial regulatory authority in the United Kingdom, published a feedback statement evaluating industry responses to its proposals presented to the public in April 2024. The document contains FCA expectations regarding the role of the Future Entity, which will be responsible for the long-term governance of open banking in the United Kingdom, its position in the open banking ecosystem, and the next steps. The FCA emphasizes that policy work is ongoing and the proposals are subject to future legislation.

While the FCA aims to promote competition in open banking services, it draws attention to the importance of central standards and oversight mechanisms that will ensure the interoperability and consistency of services. The Future Entity is not expected to be the owner or operator of commercial schemes. Instead, it is intended to set API standards, and provide certification and directory services.

Market actors who participate early in commercial open banking applications may gain significant advantages such as having a say in shaping standards and increasing brand awareness. However, these organizations may face higher initial costs and regulatory uncertainties.

The feedback confirms that the Future Entity will be the primary standard-setting body for open banking APIs in the United Kingdom. Monitoring API performance and assessing compliance with relevant standards, providing directory and certification services, and establishing close coordination with organizations operating the Multilateral Agreement (MLA) are envisaged.

The Future Entity will be established as a not-for-profit company and will not be a public institution. It will be subject to FCA regulation as an interface entity under DUAA.

The FCA expects commercial pilot applications to develop under industry leadership as a competitive layer. The Future Entity is expected to take on a role in open finance over time. The FCA has announced that open finance will be prioritized within its five-year strategy and plans to publish a roadmap by March 2026.