Natwest Calls For A Step Change In Open Banking Regulations

Natwest has called for a “step change” in the regulatory framework around open banking. The institution has said that the open banking industry is shifting towards the next stage of its life, and there should be more incentives in the industry to expand the reach of this space.

Natwest seeks more incentives to support open banking

The report by Natwest calling for more development in the open banking industry follow a research that was conducted by the Oxera consultancy company. The bank has now said that there is a need for an upgrade in the system to ensure that open banking services are available to more people.

The head of bank of APIs at Natwest, Claire Melling, said that banks, fintech companies, and regulatory bodies needed to work in unison to develop a new and flexible framework and commercial incentives that will unlock more use cases across the open banking industry.

The recent report by NatWest has suggested that the open banking industry was a qualified success. The research referred to the seven million people that have used the open banking platform since it was launched in 2018. Nevertheless, the payments being made through open banking services are still minimal compared to the traditional options.

“This report makes it clear that 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. By acting on the recommendations in this report, we can enable Open Banking to reach its full potential and, ultimately, deliver new and enhanced propositions that will improve customer choice and experience.”

Open banking came with benefits

The report highlighted a wide range of benefits that came from adopting open banking. It said that banks needed to be mandated to provide more use cases and grow the scope of the open banking system such that banks would offer the needed data through APIs at no cost.

The report also addressed the challenges that came with fraud liabilities. Currently, banks are shouldering the cost of fraud, and third parties have very little incentive to reduce the risks that come from engaging in fraud.

The head of policy at Innovate Finance, Adam Jackson, said that there were existing issued around performance reliability and the speed at which banks responded on open banking services such as instant payments.

Jackson also said that regulatory bodies need to boost the availability of services and streamline the performance of open banking APIs. Moreover, transaction limits also needed to be under more scrutiny.

This report comes at a time when regulators are showing increased interest in open banking. The open banking services were initially launched by regulators in 2017, and it led to dominant high-street lenders being forced to make customer data available to third-party challengers.

The scheme announced by the firm entered a new phase in January 2023 after six of the largest banks across the UK complied with the requirements around open banking. In April this year, regulators announced the formulation of a long-term regulatory framework for the open banking sector that will unlock massive potential.