1.”You have asked what action can we take to help ensure the potential of open banking is maximised”.
AgeWage was set up to help people make sense of their retirement saving and to convert “pension pots” into a retirement plan. We need you to help savers get access to their data – specifically their contribution histories and the current value of their pots (Net Asset Values or NAVs). The ecosystem that makes open banking work, could make open pensions work. You can intervene to unblock the pipes that make it hard for our users to get the information they need to make decisions and make it easier for us to act as their agents.
2. “You’ve asked for our views on what open banking teaches us about the potential development of open finance.”
We have learned from open banking the power of dashboards that offer consumers the chance to see data in a helpful way. We see people who start small , building a fuller financial picture of their saving and spending and in doing so learning how to spend, save and borrow in a more sensible way.
These lessons can be applied to retirement where people need to save for the future, organise the spending of their savings and sometimes raise capital against assets such as their house, in order to enjoy their later years and protect against extreme old age and a deterioration in health.
3. ‘You have defined Open Finance as the re-use of people’s financial data for their benefit’.
Open finance is based on the principle that the data supplied by and created on behalf of financial services customers are owned and controlled by those customers. Re-use of these data by other providers takes place in a safe and ethical environment with informed consumer consent”.
We agree with this definition. Consent is essential and those using other people’s benefits need regulation. Within these constraints open finance is a progressive way to make financial services work better for consumers. Defining open finances in terms of consumer rights is helpful.
4.“You’ve asked if we agree with your assessment of the potential benefits of open finance and whether there are others?”
You define the benefits of open finance in terms of consumers and service providers. We would add a third stakeholder, the trustee or IGC who stands as a consumer champion and needs access to data that tells them what individuals or groups of individuals are getting by way of value for their money. Employers are increasingly taking an interest in how the workplace pensions they are sponsoring , are working for their staff. Open finance can provide bottom up governance that explains concepts like value for money in terms that consumers can understand. We could define this additional benefit of open finance as “fiduciary reporting”.
5.You ask what we can do the maximise these (4) benefits. We think that pensions should fully participate in open pensions.
The Call for Input mentions the Pensions Dashboard and this will be the primary driver for a change to “open pensions” but there is a danger that the dashboard could become a closed loop in which a small amount of what consumers need is made available and the prescriptions of Government actually prevent rather than encourage innovation. The delays in implementing pension dashboards have resulted from arguments over the involvement of “for profit” organisations, as this document suggests, the interests of consumers and businesses can both be served by removing the impediments to free-flow of data. Open Finance has a role to play in demonstrating to all pension dashboard stakeholders , the maximum benefits that they can bring.
6: You ask if there is a natural sequence by which open finance would or should develop by sector?
We have asked this question when thinking of dashboards and have concluded that a gradual approach is better than a big reveal. In the pension ecosystem there is data that is dashboard ready and data that still sits on microfiche or paper. We recently analysed the data of a bank which had archived its pre 2015 pension data. They were suffeciently exercised by the work we did on recent accessible data that they have commissioned the de-archivisation of earlier data. We use this as an example of how a gradual approach works, the trustees told us we would not have got any data if we had insisted on getting everything up front. We support mandation on holders of pension data to share data – but we don’t want mandation to force those who can go now to wait.
7.You ask if we agree with your assessment of the potential risks arising from open finance and whether there are others?
Over the summer we invited 120 of our investors to test a value for money scoring system we have developed. We were surprised by two things; firstly we were unable to get simple information (contribution histories and NAVs) from providers; we had to tell nearly a third of our investors why they couldn’t get the information they’d requested and there was considerable frustration among this group. We fear we may have put them off sorting their pensions because open finance didn’t work. Secondly we found that telling people what had really gone on with their money had alarming impact on our saving investors. One was so pleased with the value they were getting from their workplace pension that they said they were considering moving their defined benefit pension to it. Another saver, who had been investing in a cash fund for fourteen years threatened to sue his trustee because his fund had performed the average return for someone with his contribution history. On the back of these kinds of reaction, we’ve decided to apply to enter the FCA Sandbox and better understand whether the support we need to provide to our open finance metrics needs further levels of authorisation. We consider that unsupported information carries risks of its own.
8. “You asked if we consider the current regulatory framework adequate to capture these risks?”
We don’t know; our conversation with Direct Support and Sandbox managers suggests that open pensions will present challenges to the regulators that they are yet to face. I was involved in trying to avert mis-selling in Port Talbot to BSPS members after having tried to warn trustees of the dangers their Time to Choose project were creating. The agility of the regulators to meet this challenge was tested and I expect that lessons are being learned where they fell short. The Sandbox looks to us like an opportunity for both the FCA and those participating in open finance projects, to presage the risks.
9. “You asked what barriers established firms face in providing access to customer data and what barriers TPPs face in accessing that data today?”
We have submitted to Guy Opperman, the minister for pensions and financial inclusion a report on all the barriers we , as a TPP, faced in getting data from providers. These included a refusal to deal with AgeWage for not being on the FCA register, not accepting Letter of Authority submitted with e-signatures, not passing the data to us in machine readable format or simply refusing to acknowledge customers requests. We are not alone in this, we know of other organisations who report similar barriers. As mentioned earlier, we are also aware that much personal data which may have been accessible at one stage has been archived and isn’t “available” today. We have also had discussions with providers who tell us whole books of DC business are not digitised at all. Some of these problems are easy to overcome but most aren’t.
10. You asked do we think the right incentives exist for open finance to develop, or would FCA rules, or any other changes be necessary?
On some issues – such as e-signatures – there is legal guidance in place (in that case from the Law Commission) but in others providers seem to be interpreting FCA guidance in different ways (for instance whether we as a TPP need to be FCA authorised). Some providers have different interpretations from department to department. It seems to us there is a need for the FCA to clarify what the legal obligations are on data providers in dealing with consumer requests and with TPPs. The incentive to meet these obligations is their compliance imperative to comply with the law and with regulatory guidance.
Beyond the incentive to stay compliant, there is a commercial imperative to participate. We have found providers who feel they will be net winners as aggregators and others who see TPPs as taking money away from them. The latter are disincentivised and the former incentivised. Without a regulatory intervention, we expect that those who see themselves losing will continue to put up barriers to open finance. We see similar issues with third party administrators (TPAs) of dc pensions who see the transfer of pots from their management as a threat to their revenues (as they are paid by the record). We have seen many TPAs refuse to co-operate in data sharing, most notably the Origo transfer hub, where is was not in their commercial interest to do so. This was despite it being in the interests of Trustees and members of their occupational schemes , for data to be shared. We call this “dog in the manger”.
11. “You asked if we have views on the feasibility of different types of firms opening up access to customer data to third parties?”
Our view is that for open finance to work , it must be overseen by regulators with the capacity to intervene and that those interventions should be consistent. In the world of pensions, there are two regulators – FCA and tPR. We see those firms whose services are regulated by the FCA objecting to different treatment being shown to tPR regulated firms. We need joined up and consistent policies that put all data providers behave consistently.
12. “You asked what costs would be involved in opening up data access and that you are interested in views on the desirability and feasibility of developing APIs”.
For firms like ours, developing APIs to access our database is very quick, simple and cheap. But our experience working with Pensionsync in creating APIs for the sharing of data as part of auto-enrolment showed that accessing insurer’s databases can be a long and time consuming business with no certainty of success. This is not necessarily the insurer’s fault, APIs were never a consideration when their databases were created and the technical architecture used in the 1980s and 1990s is typically incompatible with Open Pensions. Our view is that many of these databases will struggle to integrate to dashboards and other data interrogators.
13. “You asked if we have views on how the market may develop if some but not all firms opened up to third party access?”
We are sanguine about some non participants. Consumers – when searching for financial products are used to hearing that some providers could not quote on-line and recognise that sometimes it won’t be possible to have perfect information. Many pensions offer a defined benefit or are hybrid where the benefit is a guaranteed annuity or a with-profits pot value that may need manual calculation. Many legacy pension contracts are not set up to provide on-line values and will never do. But this is not a reason for abandoning open finance – 90% solutions still work.
14.”You asked what functions and common standards are needed to support open finance and how should they be delivered.”
We are encouraged by the work of the OBIE and see much of it as replicable in other areas (such as pensions). We know several members of the Open Finance Advisory Body and are very encouraged by their analysis of what standards need to be in place; specifically- the technology architecture (eg open APIs)
• operating principles, processes and practice
• security protocols
• certain areas of user experience design
• service level agreements for performance
• liability models
• dispute resolution
• consent management and data rights
• authentication and identity management
To these we would add the need for training of those who run the customer interfaces at data providers who have been inculcated by a culture that says “compute says no”. We don’t just need standards, we need training to ensure they are met and maintained.
15. “You asked if we support the BEIS smart data initiative”
We favour introducing individual Smart Data initiatives across all “regulated markets”, i.e. utilities, communications, rail, and financial services. These initiatives would essentially be separate from one another and subject to specific rules, albeit with a high degree of coordination . We see this each initiative as mutually supportive and supporting public confidence in GDPR and data protection in general.
16.”You asked to what extent should the standards and infrastructure developed by the OBIE be leveraged to support open finance?”
We don’t feel well equipped to speak in detail but see that the OBIE infrastructure and standards are transferable to open finance and indeed open pensions. We support the principle of TPPs being FCA registered, which is one of the reasons we have applied for FCA registration.
17.”You’ve asked if we agree that GDPR alone may not provide a sufficient framework for the development of open finance.”
We do not see GDPR in itself as capable of enabling Open Finance to deliver on its potential. We need more detailed intervention from regulators (for pensions both the FCA and tPR). These interventions are needed both to free up data and to ensure that consumers are protected from potential abuse from those interpreting data and using it for commercial purposes.
18.”You asked what other rights and protections are needed and if the open banking framework the right starting point.”
We think the open banking framework is the right starting point for establishing the consumer rights and protections needed to establish and run pension dashboards and other initiatives needed by people saving for and creating adequate personal retirement plans . There are a number of particular risks faced by the long term investor, notably the risks of being scammed by unscrupulous investment managers who recognise that long-term investments can easily become Ponzis.
19. “You asked what are the specific ethical issues you need to consider as part of open finance”.
We are mindful of recent scandals relating to the selling on of personal data to those who can exploit it for commercial gain. While much of this commercial activity is acceptable, risks from identity theft are all too real. The privacy of data is a matter for each individual but those who are managing data must be aware of decency levels and abide by the general principle of treating customers fairly.
20.”You asked whether we have views on whether the draft principles for open finance will achieve your aim of an effective and interoperable ecosystem”.
We believe that the FCA get help create an effective and interoperable ecosystem for open finance. Our confidence is based on the platform that has been created by open banking and on the capacity of parts of the industry we work in to adopt open standards when required to. We are thinking of the way in which payroll and providers have developed interoperability to manage the challenges of auto-enrolling 10.5m workers through over 1m employers.
For Open Finance to take off, there need to be clearly laid out problems which open finance can be used to solve. We can see the problems that need solving in our niche in the larger market, we suppose that other sectors such as general insurance, mortgages and consumer credit will find their problems too.
For all the sectors who could use open finance to work together, the general set of principles will be helpful. But we the need granularity in regulations that go beyond general principles and ensure that initiative such as the pensions dashboards can flourish. That granularity needs joined up regulation.
21.”You asked how should these set of principles be developed and whether we have views on the role the FCA should play”.
We have found this call for input very helpful in developing our strategy. The development of these principles need to incorporate the input from all respondents. The FCA have the resources to do this properly and your proven ability to work with organisations such as the CMA and BEIS gives us confidence that Open Finance could be an example of truly joined up government. We want to see initiatives such as digital identities incorporated into the pensions dashboard and the FC can be the interface between cabinet office and the pensions community.
22.”You asked if we have views on whether any elements of the FCA’s regulatory framework may constrain the development of open finance”.
As we have mentioned, we have seen examples where the FCA’s regulatory framework haven’t worked to the consumer’s interest. We give as an example the handling of DB pension transfers where we feel the FCA were too ready to listen to intermediaries and did not listen to trustees , employers and consumer advocates.
Another example where the regulatory regime comes up short is in engaging with collective pension schemes. We think that initiatives from other parts of Government, such as the DWP’s work on CDC, have not been properly embraced by the FCA’s policy teams and this has given rise to an “us and them” perception of regulators. We think that pension initiatives like CDC should be better embraced by the FCA. We say the same things to tPR about FCA initiatives like Open Finance. It is natural for financial services to work in silos, it is a broad industry, but we need more regulators who take a holistic view of consumer issues.