Home Policy & Governance UK open banking body faces governance overhaul

UK open banking body faces governance overhaul

Open banking in the UK: Global Government Fintech's coverage, which has included an interview with Imran Gulamhuseinwala almost one year ago

The organisation steering the UK’s adoption of open banking is to be overhauled following a damning report into governance failures.

The Competition and Markets Authority (CMA) on 1 October published the findings and set out next steps in a statement entitled ‘Update on Open Banking’ following an independent investigation into allegations at the Open Banking Implementation Entity (OBIE).

OBIE was established in 2016 by the CMA, a non-ministerial government department, with the country’s nine largest current account providers (known as the CMA9) required to create and pay for it. Its future is uncertain with the CMA having run a consultation on the future governance of open banking earlier this year to reflect the fact that the organisation is near to completing its purpose – building frameworks, such as software standards, to propel open banking from embryo status to a fully functioning financial services ecosystem.

The body’s trustee, Imran Gulamhuseinwala, has resigned following the conclusion of the investigation, which was led by an independent corporate governance specialist, Alison White, working with law firm Mishcon de Reya. White was appointed to lead the investigation last year after receipt of a whistleblowing complaint setting out a number of allegations relating to OBIE; to Gulamhuseinwala; and to certain current and former senior staff members.

The investigation concluded that ‘inaction and failures by the leadership of OBIE allowed a culture of bullying and intimidation to prevail’. Separately, it found there was a failure properly to manage conflicts of interest at the organisation and though it did not find any evidence that this was exploited for private gain, there was an unacceptable risk that it might have done so.

‘Too few checks and balances’

White’s ‘Investigation of Open Banking Limited’ report, which runs to 38 pages, stated that the number of people who described OBIE’s working environment as ‘toxic’ was ‘overwhelming’, and concluded that there were ‘too few checks and balances’ in its governance. Nearly 50 people were interviewed.

The investigation more broadly found that a lack of appropriate corporate governance had contributed directly to what happened. It found no evidence, however, to conclude that Gulamhuseinwala himself had bullied, harassed or discriminated against anyone.

White’s report also concluded that the CMA, and the CMA9, should accept their share of responsibility for not putting in place stronger governance mechanisms from the outset, ‘for lack of attention to issues of governance throughout the programme and for not improving the governance when it became clear that the project was becoming more complex and far longer than originally anticipated’.

CMA looking to learn lessons

Charlotte Crosswell, a well-known figure in fintech as a former chief executive of membership group Innovate Finance, has been nominated as OBIE’s new implementation trustee and chair. She began working for OBIE this summer in the role of ‘transition lead’ (with ‘transition’ meaning the planned transition to the currently unannounced future arrangements for UK open banking’s oversight).

In addition, new non-executive directors will be appointed to the OBIE board ‘as a priority’ to provide independent scrutiny.

The repercussions are also being felt at the CMA. Kirstin Baker, an independent non-executive director of the authority, is to lead a review ‘to identify the lessons for the CMA in its approach to designing, implementing and monitoring remedies in its market investigations’.

“The investigation has identified significant failings that require a swift and substantial response. Everyone involved needs to accept their share of the responsibility for this and act on the lessons learned,” said CMA chair Jonathan Scott.

Awaiting clarity on the future

The CMA is also giving priority to the publication of its long-awaited verdict on open banking’s future governance. White’s investigation’s findings will be taken into consideration alongside responses it received to its consultation.

Crosswell, who represents UK fintech on the Department for International Trade’s Financial Services Trade Advisory Group, said she “looked forward to the CMA’s consultation announcement into the future governance of the OBIE”, adding that she hoped this would “give us greater clarity and enable us to implement fully the kind of leadership, governance, structure and culture that is important for a progressive and permanent organisation.”

The UK is widely seen as an international leader when it comes to rolling out open banking, which aims to boost competition in financial services by enabling third parties, such as fintech companies, to use customers’ financial data (with their permission) to develop new apps and services.

In a statement on 1 October, OBIE said that Gulamhuseinwala – who was appointed to the trustee role in April 2017, hired (initially on secondment) from professional services firm EY where he was leading its global fintech practice – as ‘handing over [the] reins’ as the organisation focuses on its ‘next stage of transition to deliver open banking ‘.

There are now almost 800 companies in the UK’s open banking ecosystem, as well as four million people and small businesses ‘regularly benefitting from open banking-enabled services’, according to OBIE, which states that Crosswell will ‘help deliver the CMA and the OBIE’s joint goal of taking open banking mainstream’.

In addition, the UK government is itself embracing open banking: HM Revenue & Customs (HMRC) confirmed to Global Government Fintech last week that a total of at least £1 billion in tax – via more than 500,000 individual payments in total – has been paid to the government using open banking technology since it engaged a fintech company, Ecospend, to enable it to collect tax payments in this way. 

OBIE’s costs for 2020 were about £36m (about $49m) – down from about £47.6m in 2019 – with income of about £3.4m in 2020, according to its annual report, which states that it had a team of more than 100 (full-time equivalents) during 2020.

Gulamhuseinwala referenced the HMRC milestone in a statement released by OBIE:

“Open banking is founded on a big idea: that our financial data is valuable, and we should be able to use it to get a better deal from the financial services industry. It has been my privilege to serve in the role of the open banking implementation trustee.  
As the implementation trustee, my remit was to deliver on the OBIE’s roadmap and lay the foundations for a world-leading open banking ecosystem. It’s a great source of pride that during my tenure the OBIE team have accomplished that.
“The UK has become the global leader in open banking with nearly 800 participating firms and more than 4m users with plenty more growth to come. I am particularly pleased to learn that HMRC has very recently processed just over £1bn in open banking payments thereby saving the taxpayer several millions in card-processing fees.

The implementation trustee role came with a unique and sometimes conflicting remit. Challenging old systems and legacy players was never going to be an easy undertaking, yet thanks to our incredible team, we’ve made huge strides in driving forward regulatory transformations including, for example, in the payments space with smarter payment solutions such as variable recurring payments (VRPs) for sweeping. 
I have every confidence in the excellent existing OBIE team, and believe the organisation is in strong position to successfully take open banking mainstream and continue reforming the industry for consumers and small businesses. I wish Charlotte and the wider OBIE team all the very best success in achieving that.”


Global Government Fintech’s dedicated open banking / open finance section

HMRC reaches milestone as £1bn in UK tax paid through open banking’ – our news story (29 Sept 2021) on the UK government department’s integration of fintech solutions into its own operations (in this case, enabling people and organisations to pay tax through open banking)

‘Open banking “set to become globally ubiquitous”: report’ – our news story (21 June 2021) on the ‘Open Banking Readiness Index: The Future of Open Banking in Europe’ publication

‘Open finance: phased rollout better than “big bang” launch, UK’s FCA told’ – our news story (9 April 2021) on the FCA’s publication of a ‘feedback statement’ summarising 169 responses to a ‘call for input’ on open finance

‘From OBIE to the “Future Entity”: UK consults on open banking governance’ our news story (8 March 2021) on the CMA’s consultation on open banking’s future governance

‘We’re in the final lap…’ – an interview (14 October 2020) with Imran Gulamhuseinwala that explored OBIE’s journey so far, challenges ahead – and open banking’s potential for government