PIFMA has responded to FCA’s call for input on open finance. While it applauds FCA’s stance on encouraging innovation, and feels the financial services sector has lagged behind other sectors in adopting digital technology, it also feels that open banking is perhaps not the best template for open finance. Its main concerns are:
- open banking is a simple model with a small set of transactions, implemented by 9 banks, whereas open finance would require participation of a broad range of firms across the industry, in a far larger and more complex project than open banking. It thinks the Pensions Dashboard would be a better prototype;
- FCA has not actually asked consumers whether they want, and would use, open finance;
- experience has shown it takes a long time to develop common data standards, and these would be necessary and would be complex and expensive anyway, even without taking into account the personal data that may be involved and how to codify critically important data. Moreover, firms will be using different grading methods which would all need to be standardised. It also asks who would pay the costs of the necessary data transfer and processing;
- It is not convinced that open finance will encourage competition between firms, and in fact may have the reverse effect if only large firms can afford to fully invest in it. Significant issues will arise if a two tier market results – with incomplete information on consumers’ financial pictures, and disadvantaging small firms who get left behind. Some firms are also unwilling to share their specialised portfolio modelling;
- some members are worried that open finance could be just a “read only” exercise, that could result in clients transferring portfolios to firms that do not have the full picture of the client’s history and cannot know their best interests;
- consumers are generally inert, and PIFMA is concerned that even a better engaged customer could make the wrong decision “at the push of a button”, because of the risk of cutting advice out of the picture entirely, leading to poor consumer outcomes, especially for vulnerable customers; and
- thought would need to be given to what data consumers were consenting to be shared.
PIFMA says that if FCA does go ahead, it might start with the simpler services only, but there will need to be agreement on who is responsible for managing and maintaining the data, and meeting the cost of maintenance. It says FCA does not have this experience and should not be the entity to do it.