Out-Law News 3 min. read
01 Dec 2015, 2:39 pm
The Treasury is already behind a drive to deliver a new open API standard in UK banking and, in a new report setting out its plans to boost competition in UK markets (30-page / 684KB PDF), it confirmed that details of the new standard are expected to be announced before the end of the year. APIs (application programme interfaces) allow software applications to talk to each other.
However, it has now outlined its plan to ensure that other "regulated sectors" also facilitate open access to data in their industries.
The Treasury's report said the government would work with industry and regulators to ensure that "by 2017 consumers across the regulated sectors have easy access to the data they need to find the best deals for them, and can authorise third party intermediaries such as price comparison websites to access this data on their behalf using secure APIs". It said it would use legislation to deliver the changes "if necessary".
"As part of this, the government will work with regulators to promote the public profile and understanding of the opportunities better data availability provides," the Treasury said. "Tariff data should be made similarly available in a machine readable form."
The plans to promote the use of APIs in industries such as banking, energy and telecoms represent a follow up to the midata initiative which was developed under the previous coalition government in the UK.
The midata scheme requires voluntary signatories to provide consumers with access to their personal data in a "portable, electronic format". The 'consumer data' principles that midata adopters adhere to include making the data available in "an open standard format" that is "reusable" and "machine-readable" in as standard form as is possible across sectors.
The initiative, established by the government in 2011 and backed by major brands such as Google, RBS, British Gas and Visa, is intended to allow consumers to be able to access their information quickly and be able to use the information the businesses provide them with to "analyse, manipulate, integrate and share" the information "as they see fit".
Following concerns about the low adoption rate of the midata programme, the government created backstop powers to force energy suppliers, mobile network operators and current account and credit card providers, or any other group of organisations, to provide customers with greater access to their electronically-held transaction data.
However, in July 2014 the government stepped back from its threat to legislate to enforce the midata principles in the regulated industries after noting improved adoption by businesses of the voluntary regime.
Late last year the government said it would get behind plans for standardised APIs in banking after a report it commissioned said that giving consumers better access to data could improve competition in banking and also provide benefits to banks.
Banks signed up to the midata initiative have to "provide their customers with access to their transaction history data in a standard format, through the manual download of a CSV file", according to the report. In contrast, the open API standard project envisages enabling third parties' direct access to consumer current account data at consumers' request.
Competition in banking could be improved by open APIs because there is already an appetite for bank data among "alternative lenders, accounting software platforms, comparison and advisory services, payment services" and other operators in the market, the report written by the Open Data Institute and consultancy group Fingleton Associates said.
Banks that create external APIs could benefit because it would enable them to become more of a "platform" for other services, the report said.
An industry led working group was established earlier this year to develop a framework for an open API standard in banking. It is due to "report by the end of the year with more detail on the design of the open API standard and how it can be implemented", the Treasury's latest report said.
The Treasury said the new standard would "help financial technology (FinTech) companies make use of bank data on behalf of customers, to provide a range of value-added services".
The Treasury report follows the proposed remedies the Competition and Markets Authority (CMA) set out in October to improve competition in the banking market.
At a global payments conference hosted by Pinsent Masons, the law firm behind Out-Law.com, last month, Matt Hammerstein, head of client and customer experience, personal and corporate banking at Barclays, said there are "millions of potential use cases" for current account data. Hammerstein said those uses are dependent on a "common standard framework" being developed.
Financial services and technology law expert John Salmon of Pinsent Masons said earlier this year: "The use of APIs in banking will enable customers to access their transaction and other bank account data and share it with third party businesses, helping them to make more informed choices than before about what financial products and services best suit their needs."
"Big banks will be expected to share credit data with alternative finance providers such as peer-to-peer (P2P) lenders, and will refer small and medium-sized enterprises (SMEs) that they have turned down for loans to them, giving these firms a second chance to raise money. For the banks themselves, opening the doors to their customers' data is likely to increase competition within the sector but doesn’t necessarily have to mean going head-to-head with alternative sources of finance or other banking services; instead it could lead to partnerships and collaborations with new entrants to the banking market or a broader range of technology firms," he said.