The encyclopedia · Strategy & Leadership · Strategic decision · 2018
UK CMA made nine banks build the API rivals use
The UK's CMA ordered its nine biggest banks to build and fund the open API that lets fintech rivals access customer data, rather than fining them.
UK Competition and Markets Authority (CMA9)
the move
The UK's Competition and Markets Authority investigated the retail banking market and found that incumbent banks' exclusive control over customers' own transaction-level data was a core structural barrier: fintech challengers with better product ideas simply couldn't build competing services, because they had no way to see a customer's spending history or initiate payments from their existing account without the bank's cooperation, and banks had no commercial incentive to hand that access to their own competitors voluntarily.
In August 2016, rather than pursue a traditional antitrust remedy like a fine or a forced breakup, the CMA issued an order targeting the nine largest UK banks by market share — Barclays, HSBC, Lloyds, NatWest (RBS), Santander, Nationwide, Bank of Ireland, Allied Irish Bank, and Danske Bank, collectively holding over 90% of UK consumer and small business accounts.
The CMA's remedy required the CMA9 banks themselves to design, build, and fund a common, standardized open API — not merely to permit third-party access in principle, but to construct and maintain the actual technical infrastructure that would let licensed fintech competitors read account data and initiate payments directly. The banks jointly funded the Open Banking Implementation Entity (OBIE), a purpose-built nonprofit tasked with writing the shared technical specification, running conformance testing, and operating the directory of authorized third parties. Rather than the regulator buildin
why it works
- Fines punish past behavior without removing the structural barrier.
- Breakups are slow, costly, and legally contested.
- Ordering incumbents to build the infrastructure directly dismantles their data advantage.
- Incumbents have the technical capability to build a bank-grade standard.
- Regulatory teeth ensure compliance, though incumbents may do the minimum.
what transfers
When a dominant firm's advantage is exclusive access to a resource, compel it to build and fund the shared access mechanism itself.
what came after
By January 2018 the CMA9 banks launched standardized open APIs; open-banking products now serve over 6.5 million UK users. UK Open Banking became the reference model cited globally for regulator-mandated financial data portability, directly informing the EU's PSD2 directive and open-banking regimes adopted in Australia, Brazil, and other markets, while OBIE's successor bodies continue overseeing the standard as adoption has grown into the tens of millions of users.
references
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