The biggest transformations in payments have so far been regulatory-driven, according to Imran Gulamhuseinwala, trustee of the Open Banking Implementation Entity (OBIE). And the latest breakthrough has come from a recent decision by the Competition and Markets Authority (CMA) to make the nine largest banks implement the same mechanism for transferring money across accounts by January 2022.
This is the last major piece of functionality to be delivered under the Open Banking remedy, which was established in 2016 following a report by the CMA which found that older, larger banks didn’t have to compete hard enough to gain customers’ business, while newer banks found it difficult to access the market and grow.
Without going into the technicalities, this ruling lays down the plumbing to allow automatic transfers. It is currently applied to sweeping – moving money into higher earning interest accounts at the end of the day – and Gulamhuseinwala says it will be the basis for smarter finance. It also gives customers instant access to higher earning interest accounts.
Which brings me back to investment platform transfers. The Financial Conduct Authority (FCA) has responded, finally, to my compendium of transfer issues which so many of you kindly took the time to share.
For those who missed previous columns, the experience of transferring platforms can often be far too slow and 60-odd people wrote to me to share poor to woeful recent platform transfer experiences, which were shared anonymously with the regulator.
The response, as expected, was pretty non-committal. The regulator pointed to a rule introduced last year which requires all platforms to give the option of transferring in specie, which means you don’t have to spend time out of the market. This is a welcome development, as its previous consultation found that having to sell to transfer was putting some people off.
But it doesn’t solve the problem of how long the process can take. And it is in specie transfers that tend to take the longest, particularly of unlisted funds that aren’t linked up to electronic transfer systems.
The FCA pointed to the industry body called STAR – Speedy Transfers and Re-registration – which was established to improve the process. While many of its objectives are vague, it will soon start publishing transfer times data so that people can compare platform performance which might shame the laggards into improvement. Star has also said that it will specify good practice standards and timings in the transfer process. The sooner that is confirmed the better.
Hopefully this collaborative approach will be enough to spur adequate transfer standards. If it isn’t, STAR might consider taking similar action to OBIE and lobbying for further regulatory action. As Gulamhuseinwala says, big changes are usually regulatory driven.
In the FCA’s “Dear CEO” letter published last month, it confirmed that it is committed to carrying out its review of platform transfer times in 2022. Its letter says: “We will carry out a review of the progress made and consider whether we need to take further regulatory action.”
It also says if any technology changes are required to meet STAR requirements, it expects firms to budget and plan for them accordingly, and share their plans for compliance.
