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The UK’s Labour Party has said that it will “deliver the next phase” of open banking and “embrace the potential” of open finance in a new statement of intent to the financial services industry.
Election year is upon us for many jurisdictions, including the UK and EU, and it looks like payments and the fintech sector more broadly will be key talking points for these jurisdictions.
The UK’s Labour Party, currently in opposition, has released a new document making various financial services commitments and one of these is to “embrace innovation and fintech”.
The document has so far been praised by two key trade associations representing the UK’s fintech sector.
For example, the Payments Association said it “positively welcomes” the policy plans.
“I’m pleased to see a sensible, achievable, and ambitious plan to boost innovation,” said Riccardo Tordera-Ricchi, head of government relations and policy.
Further, he added that “it's good to know that there is no specific mention of mandatory reimbursement, which is an unpopular measure in the industry and doesn't help to prevent crime".
Meanwhile, Innovate Finance CEO Janine Hirt also greeted the statement of intent.
“The fintech ecosystem will be pleased to see that this provides significant continuity on financial services policy,” she said, adding that it also signals “intent to accelerate work needed to maintain the UK’s competitiveness”.
The centre-left party praises the UK as having historically led the world in fintech.
“However, we are in danger of slipping behind when it comes to innovation in FS,” the party cautions.
In particular, Labour has highlighted the risk of Paris emerging as a competing fintech capital in Europe driven by President Macron’s "Choose France" business campaign.
Embracing open banking
Labour, whom are led by Sir Keir Starmer, praise open banking as having “driven competition in payments, improved access to credit, and given customers more ownership of their data”.
The party has made clear that it supports the efforts of the Joint Regulatory Oversight Committee (JROC) and has said that it has aspirations to “build upon its early successes to deliver new use cases for SMEs and consumers”.
“Labour supports the JROC’s work to define the next phase of Open Banking including laying out the long-term regulatory framework, determining the future oversight entity, and establishing an economically sustainable ecosystem,” the party said.
Furthermore, the party has said that it wants to “embrace the potential of open finance to improve financial wellbeing”.
Labour says that it “recognises” the potential of open finance to improve financial inclusion and believes that it could “build on the early successes of open banking”.
“A Labour government will work with regulators and industry to develop the roadmap for Open Finance to prove its value and fulfil its potential to improve individuals’ financial wellbeing,” the document says.
If the party wins the general election, Labour has also said that it will ask the Payment Systems Regulator (PSR) and the Financial Conduct Authority (FCA) to evaluate the potential to stand up a new regulatory sandbox to encourage development of innovative products to reach excluded and underserved communities.
It notes jurisdictions such as Ghana, India and the United Arab Emirates as having created sandboxes with a particular focus on financial inclusion to deliver better outcomes for consumers.
“Labour will direct the regulators to also explore a post-sandbox roadmap to support participants in receiving regulatory authorisation to bring their products to market,” the party continues.
The party, whose financial services policies are driven by former banker and financial regulator Rachel Reeves, also says that it “recognises the growing case for a state-backed digital pound to protect the integrity and sovereignty of the Bank of England, and the UK’s financial and monetary system”.
As with the current Conservative government, the party has said that it “fully supports the Bank of England’s work in this area”, continuing that it wants to ensure that issues such as threats to privacy, financial inclusion and stability are effectively mitigated in the design of a central bank digital currency.
Taking on fraud
According to Labour, it “will reinforce consumer protection in financial services”.
This includes by instilling a “joined up” approach to tackling fraud.
The party has said that “an integrated approach across government, law enforcement, regulators, financial services firms, and tech companies” is needed to address “the entire ecosystem which enables fraud to occur”.
“This must involve a regulatory framework for tech companies and telcos to participate in the fight against fraud, including through sharing data with FS firms to enhance detection and prevention measures,” the party states.
The party has also said that it wants to support work by the FCA and the PSR to allow payment services providers (PSPs) the flexibility to delay suspicious payments.
“Labour will also direct the FCA and the PSR to evaluate the potential impact of mandated delays on customer retention,” the party confirmed.
Further, Labour has said that it will work with regulators and PSPs to ensure there are appropriate dispute resolution processes for customers if payments are mistakenly delayed.
Streamlining regulation with the Consumer Duty
Labour, which was last in government in 2010, has also embraced the FCA’s Consumer Duty in the document.
“This outcomes-based approach provides an opportunity to streamline some of the duplicative and excessively procedural rules in the FCA’s more than 10,000-page regulatory handbook,” Labour said.
According to Labour, it will direct the FCA to issue an open call to industry to identify rules that have been made redundant by the Consumer Duty.
It will also call on the FCA to define a transparent process for evaluating and responding to suggestions, stating that it respects the FCA’s independence in determining the appropriate changes in line with the Consumer Duty.
With regard to consumer protection, Labour has reaffirmed its plans to regulate the buy now, pay later (BNPL) sector.
“Building on conversations with the sector, Labour has laid out a plan for regulation, which has received broad support from the sector, and can be implemented quickly to better protect consumers and provide certainty for BNPL providers,” the document says.
