The UK's City regulator is to explore how data could be opened up across financial services.
The Financial Conduct Authority (FCA) said it plans to publish a 'call for input' later this year on 'open finance', in which it said it will "look at how the principles of open banking, such as those relating to data sharing, can be applied across financial services".
Financial services and technology law expert Luke Scanlon of Pinsent Masons, the law firm behind Out-Law, said: "This is another example of the FCA being on the front foot and responding to market developments at a very early stage in comparison to regulators in other parts of the world."
"Open finance has the potential to impact every aspect of the financial system in some way and therefore the more work that is done early on, the more potential there is for unknown issues which could have significant effects on consumers of financial products and services, investors and business more widely to be identified and addressed," he said.
Under the open banking regime, major banks operating in the UK are obliged to let third parties access payment account data they hold where the account holders give their consent to do so and where a range of standards, primarily centred around data security and preventing fraud, are adhered to. The initiative is designed to enable businesses other than the major banks to use the data banks hold to offer new and competing services.
The FCA revealed its plans to explore a future of 'open finance' in its first annual report looking at its regulatory perimeter. In the report, the FCA identified "swiftly evolving markets and business models" as one of the main challenges to its regulatory perimeter, including as a result of technology companies entering the financial services market.
"While fintechs are financial services firms aiming to use technology to deliver products in a more efficient and consumer friendly way, technology companies themselves are increasingly pushing into financial services," the FCA said. "Large technology companies, such as social media platforms and online retailers, are considering or have already made steps towards providing financial services in various ways. Some of these have never previously engaged in financial services activities. The market power of these companies could create a significant impact on financial services consumers."
"This impact could be both from providing regulated activities, such as payment or banking services, and from other activities outside the regulatory perimeter. The boundary between providing mostly unregulated technical infrastructure to deliver financial services and providing regulated activities is increasingly narrowing. This also raises questions around whether financial regulators have the necessary tools and techniques to effectively oversee those organisations," it said.
The FCA said it is monitoring developments in relation to tech companies' move into financial services "very closely".
The regulator also said it is considering how the existing financial promotions regime could be updated to make it "more effective in a digital age".
"Digital channels enable firms to create, market and sell financial services products very quickly," the FCA said. "This means that the speed at which harm can be caused by a misleading or unfair financial promotion has greatly increased. Internet or social media adverts reach millions of people in an instant, challenging our ability to detect and act against misleading adverts. Historically, we asked traditional media to voluntarily remove adverts we believed to be fraudulent. This is harder to achieve with internet service providers. We address this with warnings on our own website, but this is clearly not as effective as taking down promotions."
The FCA said that it could consider strengthening its powers "in respect of internet service providers" in the area of financial promotions.
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