Innovate Finance Response to CMA Findings on Retail Banking
Innovate Finance welcomes the Competition and Markets Authority’s (CMA) final report on the Retail Banking Market. To read a summary of the final report click here
In particular we were happy to see the Open API standard for banking included in the final recommendations as the first foundation remedy to support greater competition in retail banking.
We hope this will enable personal and SME customers to safely and securely share their transaction history with other banks and trusted 3rd parties.
Innovate Finance and our members were integral to the development of this proposition through HMT’s Open Bank Working Group and are delighted that the CMA has accepted the potential API’s have to empower consumer choice.
We were also encouraged to see the final version of the report agreed with the case against redacted data, which would have rendered the API unusable for third party providers.
The Open API timeframe is aligned with PSD2 with all aspects of the Open Banking standard available by early 2018. This is not as ambitious as many in the FinTech community had hoped, especially given the Government’s commitment to UK FinTech, despite this, successful implementation and widespread consumer adoption is now the number one priority.
Other key measures designed to allow customers to benefit from technological advances, include:
- Requiring banks to publish trustworthy and objective information on quality of service on their websites and in branches, to enable consumers to better see how their banks perform relative to others.
- Requiring banks to send out suitable and event-based ‘prompts’ such as the closure of a local branch or increase in charges, reminding consumers if they are continuing to get the best value from their banks.
This may encourage consumers to switch providers, especially if proposals incorporate learning’s from behavioural economics to successfully “Nudge” consumers into making proactive choices rather than opting for the default option. The Behavioural Insights Team born out of the Cabinet Office is well place to help shape the delivery of prompts through a series of randomised control trials to help identify what works in practice.
However, many commentators have criticised the CMA for not going further to support consumer choice.
In terms of FinTech this is particularly relevant to capital requirements for Challenger Banks, many of which are now mobile first, API based, and potential models for how larger retail banks may shape their future propositions.
This is an opportunity missed to level the playing field for the increasing number of Challenger Banks in the UK.
What is clear is that technology is now increasingly seen as a way to solve societal, consumer and economic problems. HMT should now encourage other sectors within financial services to open up their data to consumers using APIs as part of a wider digital transformation. This will help promote competition, unlock innovation and empower consumers.
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Dan Morgan
