The Competition and Markets Authority (CMA) failed to provide enough strategic oversight and internal risk management when it set up Open Banking in the UK.

That’s the headline finding of the CMA’s latest Open Banking review, which was carried out by non-executive director, Kirstin Baker.

The review was commissioned in November 2021 in the wake of Alison White’s independent report on conduct at the Open Banking Implementation Entity (OBIE). That document revealed governance and management failings at the organisation that sets software standards and industry guidelines.

As a result of White’s report, published in October last year, the OBIE strengthened its internal processes and appointed a Chief Executive and a Director of Human Resources. 

Baker’s review, instigated a month later, was designed to establish the key lessons for the CMA to learn in designing, implementing, and monitoring the effectiveness of remedies in any future market investigations. 

The CMA kickstarted what became Open Banking with its 2016 report on UK retail banking, which found that market incumbents didn’t compete enough for customers’ business, while challengers faced too many obstacles. 

That led to the formation of the OBIE and the Open Banking ecosystem in 2018, with the aim of making it easier for customers to share their financial data securely with third parties.

Baker explained, “The Open Banking remedies are some of the most complex ever implemented by the CMA and have been important in opening up competition in retail banking and supporting the growth of UK FinTech.

“Many stakeholders I spoke to for this review underlined that the CMA should continue to be bold and innovative in using its market powers to benefit consumers. 

“However, the board recognised that there were lessons for the CMA to learn from the governance failings at the OBIE, identified by Alison White. 

“My review has found that the CMA did not match the ambition of the remedy with an appropriate level of oversight or strategic risk management.”

Key recommendations

Accordingly, the Lessons Learned review makes seven recommendations to the CMA. The organisation should:

  • Build more effective board oversight and risk management of the end-to-end strategy for complex remedies
  • Set out processes and governance for CMA board and executive oversight of the delivery and implementation of remedies
  • Consider questions relating to implementation at the remedies design phase
  • Ensure key factors are considered where a remedy establishes a new entity or a large and enduring CMA function
  • Include gateways in the remedy delivery and implementation process
  • Implement effective and agile internal governance and stakeholder engagement in remedy delivery and implementation
  • And conduct an evaluation case study of complex market investigation remedies.

The CMA has committed to implementing Baker’s recommendations in full.

David Stewart, CMA Executive Director of Markets and Mergers, explained, “However good our analysis and proposed remedies, we will only achieve better outcomes for consumers, businesses, and the economy if we follow through on our decisions with effective implementation, monitoring, and enforcement.

“That is why I am so grateful to Kirstin Baker for her review. It will help shape our work programme on remedies and I am determined that we will deliver on it and report on it publicly.”

The CMA will publish an update on its progress next year.

“The CMA seeks to be a learning organisation, so I am pleased that staff at all levels engaged constructively with this review, and that changes have already been made or are in progress to address the issues identified,” said Baker.

Open Banking facts and figures

According to the OBIE, half of the UK’s small businesses and over five and a half million consumers now use Open Banking enabled technology and services. 

After a cautious start, uptake increased significantly during the pandemic, which pushed many people towards new FinTech solutions.

April 2022 figures from the OBIE reveal that there are now 341 regulated providers, 249 third-party providers, and 92 account providers in the Open Banking ecosystem.