UK banks HSBC and Barclays have railed against open banking reforms as the amount they have spent to share customer data with smaller rivals has been ‘significantly higher’ than original estimates.
Furthermore, banks are unhappy about the open banking rules which require them to hand over detailed customer information to competitors at an account holder’s request.
Under the Competition and Markets Authority (CMA) rules, banks must share customer data with rivals, including smaller financial institutions, in order to boost competition. The watchdog recently launched a consultation about the future of Open Banking and the governance around it.
Initiatives such as open banking were meant to encourage people to switch banks and see all their accounts from one app and move to a better deal, but many are still reluctant to do so.
The open banking scheme has been heavily criticised since launching in 2018 both for failing to make a meaningful difference and adding unnecessary extra red tape in an already heavily regulated industry.
Barclays said it has been forced to shell out a significant amount of money on open banking. “The spend on implementing the Open Banking remedy to date has been significantly higher than the amounts foreseen and taken into account by the CMA in its original 2016 assessment,” Barclays told The Telegraph.
The British bank also claimed that the changes had taken between five and six years, despite the regulator informing them costs would be spread across just two years.
According to bank lobby group UK Finance, which represents over 300 firms in the industry, nine large lenders were asked to contribute £26m to the promotion of open banking reforms in the UK this year alone.
Echoing Barclays’ calls for a shake-up in the open banking scheme, HSBC said new reforms should be imposed to prevent big banks from being forced to spend heavily because of smaller rivals.
It said that larger banks should be able to “encourage cost discipline that has not existed to date”.
To add on, Nationwide too encouraged the Government to force smaller banks to contribute towards the costs of open banking in order to “minimise the issue of free-riding”.
Monzo founder Tom Blomfield argued last year that open banking has failed to improve innovation. He said, “I don’t see any businesses based on open banking in Europe whatsoever.”
Its message came after losses at Revolut more than tripled to £106.5m in 2019, while Monzo’s losses rose from £47.1m to £113.8m and Starling’s doubled to £52m.
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