JROC publishes recommendations for next phase of open banking

The Joint Regulatory Oversight Committee (JROC) published recommendations in April 2024 for the next phase of open banking, setting out detailed proposals for the design of the future entity for open banking in the UK, covering its structure, governance and funding¹. The recommendations also include proposals on how to move to a new interim entity quickly, which would provide a new home for growth and new use cases for open banking before functions move to a longer term model¹. JROC is co-chaired by Chris Hemsley, Managing Director of the Payment Systems Regulator, and Sheldon Mills¹.

On funding, the proposals would widen the base beyond the CMA9 to the largest open banking participants in the UK, including account servicing payment service providers (ASPSPs) and payment initiation service providers (PISPs)¹. On governance, the consultation sets out the view that there should be a dedicated board able to act independently of any one set of interests, with knowledge and representation reflecting the whole ecosystem, including third party providers, PISPs, ASPSPs, consumers and businesses¹.

The recommendations are open for views¹. Hemsley said the regulator continues to analyse responses and seek evidence following its consultation and will publish a response in summer 2024¹.

Separately, the Payment Systems Regulator issued a call for views in December last year on expanding variable recurring payments (VRPs)¹. Hemsley said there is broad industry agreement that the Phase 1 use cases, namely utility bills, payments to central and local government and more financial transfers, should be easier to implement because of existing functionality within the system and existing sectoral and legislative user protections¹. The regulator set out a temporary approach for VRP Phase 1 not to have an ASPSP charge, offsetting costs it judged likely to be low by removing the Faster Payments charge from the ASPSP¹. Hemsley said this initial approach may need to evolve as uses of VRP change¹.

On pricing, the regulator published principles stating that prices should broadly reflect relevant long-run costs, incentivise investment, innovation and adoption to drive network effects, and be fair and transparent¹. Hemsley said responses showed good levels of support for some form of centrally set pricing, but little agreement on how this price should be determined or who should set it¹. He said that without targeted intervention, misaligned incentives and account providers' unique position in the market will mean progress will not match the opportunity available¹.

Consumer research commissioned by the regulator found that more than two-fifths (43%) of people asked about current bills and regular payments say they want "greater control over when I pay and how much" and believe VRP will help with that¹. The research also showed that younger people aged 18 to 34, those with low financial resilience, those with fewer savings and those who may be more in debt are more likely to say they would use flexible payment options¹.

Why it matters for households

Open banking lets people and businesses move money directly between accounts and share account data with authorised providers, rather than paying through card networks. The proposals concern who pays for and governs the infrastructure behind those services, not a change to any individual account or payment. The funding change would shift costs from the nine largest UK banks named in the Competition and Markets Authority's original open banking remedy (the CMA9) to a wider group of the largest open banking participants, including ASPSPs and PISPs¹. The interim entity would take on functions before a longer term model is settled¹.

For VRP, the temporary approach means no ASPSP charge for Phase 1 use cases, with the Faster Payments charge removed from the ASPSP instead¹. The Phase 1 use cases identified are utility bills, payments to central and local government and more financial transfers¹. The regulator has not reported a final decision on long term pricing or on whether participation in VRP should be required; it said there was no consensus on a commercial model and that it will publish a response in summer 2024¹.

What happens next

The regulator will publish a response to its VRP call for views in summer 2024¹. The recommendations on the future entity and interim entity are subject to views being sought¹. No further dates for the future entity or interim entity have been reported.

More on how these arrangements sit alongside wider data sharing is set out in our guide to open banking and open finance, and the role of the payments watchdog is covered in our page on the Payment Systems Regulator.