UK seeks to boost banking services from fintechs
By Huw Jones
LONDON (Reuters) – Britain’s financial regulators said on Monday they would create a new body over the next two years to encourage more competition in banking through the use of third-party apps by fintech firms.
Open banking refers to third-party firms that use bank data from customers at mainstream lenders to offer tailored services such as lending or payments, a sector that has helped make the UK’s fintech sector the world’s third largest.
Open banking, currently used by around 7 million consumers and businesses, was launched by an order from the UK’s Competition and Markets Authority in 2018 requiring banks to share data with external companies, if customers give permission.
Regulators now want to move on to the next step of setting up a long-term body to help increase the uptake of open banking and extend it to other parts of the economy – and help London flourish as a global fintech centre.
“We will also work with open banking participants over the coming months to undertake further analysis of the options for the structure, governance and financing of the future entity,” the Financial Conduct Authority and the Payment Systems Regulator said in a joint statement.
“While significant progress has been made, more remains to be done to deliver the full benefits of open banking within the private banking markets and beyond,” the statement said.
The recommendations from regulators will sustain momentum in open banking and extend the benefits to other sectors, said Marion King, chairman of Open Banking Limited, which checks whether the nine banks are complying with open banking rules.
Britain is keen to push open banking to the next stage after Brexit to attract more fintechs to set up in the UK as the EU prepares to introduce its own, broader version of open banking.
Regulators said the UK fintech sector is successfully harnessing open banking technology, but industry officials on Monday warned against complacency.
Britain’s fintech sector ranks third globally, behind the US and China, with investment in UK fintech totaling $12.5 billion last year, said Chris Hayward, head of policy at the City of London Corporation, which manages the capital’s financial district.
“Global competitiveness is the name of the game now,” Hayward said.
Industry officials said upcoming tougher consumer protections in the UK must not hinder fintech players.
“We now need to see proportional regulation,” said Janine Hirt, chief executive of Innovate Finance, the UK fintech industry body.
(Reporting by Huw Jones Editing by Jason Neely and Mark Potter)
