Delegates voice frustration at slow progress on Open API rules during Swift event
Open APIs offer the promise of a better, more efficient and more inclusive financial services world. But delegates at the Swift Business Forum in London voiced frustration about the speed and direction of progress being made during a session on the topic.
The panel began with a discussion between Rhiannon Butterfield, head of regulatory and government engagement at the UK Payments Council, and Irene Graham, executive director of business finance at the BBA, on how open APIs should be standardised and regulated. The appeal of open APIs is that in theory, they allow content to be created and shared between banks, customers and third party vendors far more quickly and efficiently than would ever previously have been possible. Companies that use open APIs can tap into the pool of ideas, services, products and talent available in the community, cutting the cost of development while boosting the sophistication of their own offerings.
However, in reality things are not quite that easy. Regulators are still grappling with how open APIs should be implemented. The difficulty for UK banks is that there are two sources of rule-making on the subject – the UK Treasury, which published the Fingleton Report last autumn, and the European Commission, whose upcoming Payment Services Directive II contains provision for access to bank accounts. Unfortunately, these regulatory initiatives differ, leading banks in a position where two standards may have to be simultaneously implemented.
“Lots of stakeholders will have to work together to make this viable,” said Butterfield. “Businesses will benefit from greater access to data, but we need consensus. PSD II really needs to involve the EBA and other standards bodies in its decision making.”
Published last autumn, the UK’s Fingleton Report examined the use of open data and open data APIs in a financial context, with a particular emphasis on the role of third parties and their access to bank accounts. According to Butterfield, the report focused on a wider range of information than PSD II, which is due to take effect in 2017.
“Similar issues are emerging out of Europe and the UK would do well to get ahead of that and work out the kind of API issues discussed in PSD II ahead of time,” she said. “That said, we don’t think it’s a good idea for the UK to take a different direction form the rest of Europe. But either way, data cannot be taken back once it has been shared. There’s a not much time for the industry to get thinking about this.”
However, the British Bankers’ Association expressed concerns that the new regulation should not stifle innovation in the name of commonality. For Graham at the BBA, the key questions now are what standards will apply to the data, how these standards will be policed, how third party companies can be vetted and who will be responsible for carrying out the vetting.
“Whatever gets created here isn’t just a banking asset – it will benefit the consumer as well,” she said. “Remember that 60% of consumer credit is not provided by banks but alternatives such as building societies. We have to be mindful of what customers want and make sure we protect and educate them. This is bigger than just banks alone.”
Despite the panellists insistence that progress was being made, several members of the audience were clearly unhappy about the length of time it took to get approval from banks and regulators to use open APIs, particularly from start-ups.“As a start up company, we can’t afford to wait a year to talk to a bank and then two years for a response from the regulator before our business can start,” said one delegate. “We need a response much more quickly than that.”
Another speaker in the audience said that she just did not see the value of implementing open APIs from a business perspective. Others condemned both the BBA and the Payments Council for taking too long to set out standards on open APIs. “Who is meeting where to set up these standards? What is actually being done?” asked one exasperated audience member.
While Graham responded that a framework would be in place by the end of the year, and attempted to explain that the UK general election had held up progress temporarily, that wasn’t good enough for some delegates. “So you’re saying we’ll have a plan for the plan by the end of this year? Then implementation a year after that?” asked one delegate, clearly dissatisfied.