Financial Crime World

Getting Regulated as an Open Banking Provider: A Step-by-Step Guide

Preparing for Regulation

To become a regulated open banking provider, you must meet specific requirements. Here’s what you need to do:

1. Understand PSD2 and FCA Guidance

Before starting the application process, it’s essential to familiarize yourself with the Payment Services Directive 2 (PSD2) and guidance from the Financial Conduct Authority (FCA). This will ensure your product or service is compliant with regulatory requirements.

  • Read up on PSD2 to understand its provisions and implications for your business.
  • Familiarize yourself with FCA guidance to ensure you’re meeting all necessary standards.

2. Clarify Your Business Model

A clear and detailed business model is crucial for your application. This will form part of your submission, so make sure it’s well-defined and concise.

  • Document your business strategy, including revenue models and customer acquisition plans.
  • Outline how you plan to operate as an open banking provider.

3. Comply with Data Protection Regulations

As an open banking provider, you’ll be handling sensitive customer data. You must comply with relevant data protection regulations in the geographical area of your customer base.

  • If you’re serving EU customers, familiarize yourself with the General Data Protection Regulation (GDPR).
  • Ensure you have measures in place to protect customer data and maintain confidentiality.

4. Obtain Professional Indemnity Insurance

Professional indemnity insurance is a requirement for open banking providers. This type of insurance will help protect your business against potential losses or damages.

  • Research and obtain professional indemnity insurance that meets regulatory requirements.
  • Ensure the policy covers all necessary aspects, such as data protection and financial services.

5. Apply to the Financial Conduct Authority (FCA)

The final step is to submit an application to the FCA, which can take up to one year. You’ll need to provide detailed information about your business model, compliance with regulations, and other necessary documentation.

  • Prepare a comprehensive application package that meets all regulatory requirements.
  • Submit your application to the FCA and wait for review.

Additional Requirements for PISPs

If you’re applying to be a Payment Initiation Service Provider (PISP), you’ll need additional funds to cover potential risks. You must have €50,000 in initial capital or higher if you provide other payment services.

  • Ensure you have sufficient funding to meet regulatory requirements.
  • Plan for ongoing expenses and financial management as a PISP.

Post-Regulation Obligations

Once you’re regulated, it’s essential to enroll in the Open Banking Implementation Entity (OBIE) Directory. This will enable secure identification and authentication with account providers, such as banks.

  • Register your business in the OBIE Directory.
  • Familiarize yourself with the directory’s features and requirements for secure identification and authentication.

By following these steps and meeting regulatory requirements, you can establish a successful open banking provider business that operates securely and efficiently.