The U.K’.s Financial Conduct Authority (FCA) currently requires any banking customer enrolled in a data sharing program under the umbrella of open banking to re-affirm their authorization (every 90 days) that they consent towards continued participation in the program. Multiple fintechs have identified that the 90-day period creates friction and places an extra burden on users that is avoidable.
“Emma Steeley, chief executive of Equifax’s AccountScore, said customers can revoke their consent at any point but are asked every 90 days if they want to simply withdraw it or reaffirm their consent through a long process of going through the consent screen, logging into their online banking and then coming back.”
The problem from both an institutional and customer perspective is that frequent re-authorization may not be convenient, and depending on individual circumstances, highly difficult to perform on a routine timeline. Research shows that every time the re-authorization window arrived, third party providers and fintechs both experienced high rates of attrition including drop-offs from open banking participation. This severely hinders the growth of the open banking sector, including limiting the ability for fintechs to organically grow a customer base.
Acknowledging these concerns, the FCA announced in Changes to the SCA-RTS and to the guidance in Payment Services and Electronic Money – Our Approach’ and the Perimeter Guidance Manual that the 90-day mark rule will no longer be required as of 26th March 2022. This marks a major win for fintechs and TPPs across the U.K. and EU who are now able to offer customers an open banking pathway that is unencumbered by frequent reminders to re-link and authorize data sharing for their accounts. It remains to be seen how significantly this regulatory change will affect the attrition rates currently affecting open banking in the U.K., but the message is clear: open banking is on the rise, and establishing a pole position is key towards leveraging the explosive growth of this financial sector.
Overview by Shreyas Shaktikumar, Research Analyst at Mercator Advisory Group