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UK fintech players are hoping that the City watchdog’s policy sprint day will give impetus to the transition from open banking to open finance.

For some time, the Financial Conduct Authority (FCA) has been hosting policy sprints on developing financial issues in the UK. So far this year, this has included sprints on crypto-assets and authorised push payment (APP) fraud.

This week, the FCA has tackled open finance, which is developing into an increasingly pertinent issue for regulators across Europe as they begin to look at the next stage in open data following the implementation of open banking.

Reports from the day have been positive and sources say they are optimistic about the outcomes. One source told VIXIO that this was down to the wide range of people present that meant that some very productive thinking and direction was developed.

"It was fantastic to see the FCA's level of commitment to re-starting the discussion on Open Finance,” said Nilixa Devlukia, chair of the recently formed Open Finance Association.

"Kudos to the FCA for putting on such a good sprint,” said Jack Wilson, head of public policy at TrueLayer. “There was a huge amount of enthusiasm and expertise in the room, and very productive, expert discussions.”

However, this has come two years after the initial call for input, he pointed out. “We need to get out of the holding pattern of discussing issues and perspectives, and we now need action from the regulators. What is key for me is an implementation entity to take things forward."

Wilson’s thinking was echoed by Devlukia, who said that she now hoped that the FCA got the input they need to formulate their next steps. “For the OFA, the crucial missing piece is an implementation body that will be tasked with taking open finance forward,” she said.

“We think current legislation going through Parliament should be used to empower an implementation body and set its open finance objectives."

Problem solving

It was intended that the policy sprint would frame discussions around three problem statements to inform the regulator’s understanding of where the right balance is between regulation and industry-led initiatives, and what this may look like.

This included the way in which open finance can be used to empower consumers, what standards, governance and interoperability are needed to develop an open finance ecosystem and the approach to data sharing and the role of third parties, such as fintechs.

Time is of the essence for the FCA if it wants to keep ahead. This is especially the case considering the success of open banking in the UK.

Meanwhile, jurisdictions such as Brazil and the EU have been pulling ahead in the development of open finance.

"The EU is quite far ahead of the UK on open finance at the moment,” Wilson said. “They are progressing a formal Open Finance framework and reviewing payments regulation. We need to do the same "

As for potential next steps from the regulator, Wilson noted that there was definitely talk of needing regulation in some areas.

“Without it, open banking's success wouldn't have happened, because the banks were not going to open up voluntarily. The FCA now needs to signal how bold they feel about creating a regulatory framework."

"There was also a sense that the FCA was saying this can't just be a free ride,” he said. “It has to be an equitable model.”

While this would be a step change from the approach with open banking, Wilson said that this is understandable. “Open finance as a pure compliance exercise won't be sustainable.”