FCA Feedback Statement FS25/4: Design of the Future Entity for UK Open Banking
Introduction
On 8 August 2025 the FCA published FS25/4, its feedback on the consultation regarding the Future Entity (FE) for UK open banking. This statement represents a decisive step in the UK’s long transition away from the Competition and Markets Authority (CMA) Order framework and into a new, statutory model under the Data (Use and Access) Act 2025 (DUAA).
The FCA’s message is clear: open banking in the UK has matured to the point where it needs permanent, independent governance. The FE will sit at the centre of this new architecture, providing baseline standards, monitoring, and certification, while commercial schemes such as Variable Recurring Payments (VRP) begin to flourish on top of it.
Why FS25/4 Matters
Open banking has now reached scale in the UK, with over 13 million active users as of March 2025, which is a 40 per cent increase on the previous year. This growth brings both opportunity and complexity. Until now, much of the governance has rested on the CMA’s Order and the transitional work of the Joint Regulatory Oversight Committee (JROC). FS25/4 confirms that JROC is being wound down and that the FCA will assume primary responsibility, supported by new legislative powers under DUAA.
For banks, fintechs, and merchants, the importance of this shift cannot be overstated. It clarifies who sets the rules, how the industry will be funded, and what regulatory guardrails will apply as new use cases emerge.
The Future Entity: Role and Structure
The FE will be established as a company limited by guarantee, operating on a not-for-profit basis. Its core role is to act as the UK’s standards-setter for open banking APIs. It will ensure that all participants work to a consistent set of technical and operational requirements, enabling interoperability across the market.
In addition, the FE will be responsible for monitoring performance and conformance with those standards, providing directory and certification services, and working with industry to ensure that commercial schemes (such as those governing VRP) are properly underpinned.
What the FE will not do is equally significant. It will not become a public body, it will not hold enforcement powers in its own right (these will sit with the FCA once the legislative framework is in place), and it will not operate commercial schemes unless there is a clear market failure. The FCA is deliberately keeping the FE’s remit focused and avoiding conflicts with industry-led innovation.
Governance will rest with an independent board, appointed through a transparent process. The FCA has been clear that this board must include strong independent voices and will be supported by advisory groups, including a consumer panel and SME representation. Concerns about conflicts of interest will be managed through robust policies.
Funding will be drawn from an equitable model, with all beneficiaries of the FE’s services expected to contribute. The FCA has not yet settled on precise mechanics, but a hybrid approach of fixed contributions for core services, supplemented by usage-based fees for premium services, is under consideration.
The Three-Layer Ecosystem
FS25/4 also clarifies the wider architecture for UK open banking, which may be thought of as three layers.
- At the infrastructure layer, interbank payment rails are being modernised under the National Payments Vision (NPV), overseen by the Payments Vision Delivery Committee. This will ultimately feed into a new Retail Payments Infrastructure Board.
- The standards layer is where the FE will sit, ensuring consistent APIs, monitoring, and baseline interoperability.
- Above this will sit the commercial scheme layer. Here, industry-led bodies will create multilateral agreements governing specific services, including rules on participation, liability, commercial terms and dispute resolution.
This separation of roles is intended to give the market clarity: the FE keeps everyone honest at the standards level, whilst industry competes to design the best commercial solutions.
Variable Recurring Payments: A First Test
The most immediate application of this new model is the rollout of commercial Variable Recurring Payments (cVRP). Scheduled to launch in autumn 2025, cVRP will enable customers to authorise a merchant or service provider to take recurring payments directly from their bank account via open banking.
The FCA has set out “guardrails” for how the first multilateral agreement should be designed. These include ensuring that competition law is respected, governance is equitable, market distortions are avoided, and robust systems for billing, disputes, and redress are in place. The operator chosen must be capable of launching a Phase 1 scheme quickly, with a plan to extend to a Phase 2 model - complete with liability management - within a year.
For merchants, cVRP promises a genuine alternative to card-based recurring payments. For banks and TPPs, it brings new responsibilities around liability allocation, dispute resolution, and consumer redress.
Feedback and FCA Responses
The consultation revealed broad support for the FE’s not-for-profit structure. Some suggested splitting standard-setting from monitoring, but the FCA concluded that this would create unnecessary complexity.
The funding model attracted the most debate. Smaller firms warned that tiered fees could become a barrier to entry, while larger players were concerned about subsidising competitors. Respondents also highlighted risks of “free-riding” and of firms under-reporting activity to reduce fees. The FCA has acknowledged these concerns and has committed to further financial modelling and industry engagement through workshops in the second half of 2025.
On governance, respondents called for broad representation and strong independent voices. The FCA has agreed, committing to an advisory framework that includes a consumer panel, SME representatives and others, while ensuring that decision-making rests with an independent board.
Legislative and Regulatory Pathway
The FE will be formally designated as an interface body under the DUAA, once secondary legislation is in place. The FCA will then consult on, and implement, its rulebook. In parallel, the CMA Order will remain in force until the long-term regulatory framework (LTRF) is ready, at which point the CMA is expected to revoke or vary it.
The roadmap is as follows:
Summer - Autumn 2025
FCA workshops with industry to refine governance and funding.
Autumn 2025
Launch of the cVRP scheme.
End 2025
FCA update on the establishment of the FE.
2026
FCA consultation on FE rules; open finance roadmap to be published by March 2026.
Implications for Stakeholders
For banks and ASPSPs, FS25/4 means preparing to comply with FE standards, budgeting for ongoing funding contributions, and adjusting liability frameworks in anticipation of VRP schemes.
For TPPs and fintechs, the FE’s certification and directory functions will become critical for credibility, while VRP provides opportunities for new subscription and invoice-based products.
For merchants and platforms, the imminent arrival of VRP offers the chance to reduce reliance on card payments, potentially lowering costs but also requiring integration with new liability and dispute mechanisms.
For investors and new entrants, the FE creates a clearer and more predictable governance landscape, which could make the UK a more attractive environment for developing open banking and open finance solutions.
Risks and Opportunities
The main risks lie in the funding model, which could unintentionally create barriers to entry, and in potential delays to the secondary legislation needed to give the FE its statutory footing. There are also concerns about consumer trust if redress and liability frameworks are not robust.
The opportunities, however, are substantial. VRP could disrupt card-based recurring payments, providing merchants with lower-cost alternatives. The FE also creates a platform for the UK to move towards open finance, expanding beyond payments to cover investments, pensions and insurance. If successful, the UK will be positioned as a global leader in regulated API standardisation.
Conclusion
FS25/4 sets the blueprint for the UK’s next phase of open banking. It creates a stable governance model in the FE, clarifies the role of industry-led schemes, and points the way to new commercial opportunities such as VRP.
For clients, the immediate priorities are to engage with the FCA’s workshops, prepare for participation in the cVRP scheme this autumn, and plan for future contributions to the FE. The direction of travel is clear: open banking is becoming a core part of the UK’s regulated financial infrastructure, and firms should position themselves now to take advantage of the opportunities it presents.
