The UK Treasury's consultation on Modernising Payments Services Regulation closes today, and the decisions that follow will shape the trajectory of open banking in the UK for years to come. Getting the future regulatory framework right is critical, both to protecting the UK's position as a leader in the market, and to creating the conditions for the next phase of growth.
The consultation raises important questions about how banks and other Account Servicing Payment Service Providers (ASPSPs) should support and enable open banking, particularly as the UK moves towards a more unified long-term regulatory framework.
Here, Robert Sullivan, Token.io's Public Policy and Strategy Director, sets out our position on two of the most consequential areas.
The first is the commercial model for open banking access. Token.io's view is that banks should continue to provide third-party providers (TPPs) with free access to basic open banking APIs, while being able to charge for enhanced or premium functionality. The principle is straightforward: the commercial model should pull TPPs towards premium APIs because they offer greater functionality and value, rather than pushing them away from the free basic services that have underpinned open banking to date. A model that degrades the baseline to drive adoption of paid alternatives would undermine the ecosystem that has been built over the past several years.
The second is Variable Recurring Payments (VRP). Token.io believes banks should be required to provide APIs for VRP, while being required to charge TPPs for access through commercial open banking schemes such as the UK Payments Initiative (UKPI). This is an important step in giving merchants the coverage and certainty they need to adopt VRPs at scale. It also helps to address some of the competition law considerations that have complicated VRP's expansion to date, by establishing a clear, scheme-based commercial framework.
The UK has established strong foundations in open banking. What comes next is about creating the conditions for those foundations to deliver genuine scale — and, eventually, to support the National Payments Vision's ambition for ubiquitous account-to-account payments. The regulatory choices made in the coming months will determine how quickly that ambition becomes reality.