MIFIDII settled the question of ownership of personal financial data, coming down firmly on the side of the consumer, rather than the bank.
The first sign of progress was the launch of Open Banking in January 2018, which sets the legal and technical framework for third party providers (TPPs) to access consumer bank accounts, either to monitor spending, or undertake transactions on an individuals’ behalf.
At the latest count, there are 40 TPPs offering consumers a range of saving, utility switching, financial dashboard and FX services that are convenient and cheap.
So what does this mean for the banks?
Banks fought Open Banking tooth and nail, claiming that it was dangerous for consumers. But in reality, they were worried about the threat to their business models.
The margins on banking services have been squeezed for years, and the rise of fintech offering better, although not always cheaper, services is a challenge.
However, we should not write off the banks yet.
They all have a trading history you can count in the hundreds of years, and they are adept at evolving to technological and broader social change.
Only recently, the emergence of internet banking and internet-only banks was initially seen as a threat, but turned into a great opportunity for banks to close down branches by the thousands.
At the moment, fintech relies on the banks, and there is no serious at-scale competitor to the banks’ established model. There are challenger current account services from Starling, Monzo and Atom, but these cannot provide the breadth of services, nor the confidence in service, that the established banks can, and they are struggling to stay afloat.
Yes, banks are welcoming and promoting fintech apps onto their system in order to plug the gaps in service, but for the consumer this means having a whole number of different apps and service providers on your phone, which does not make life any easier.
What the consumer wants is to go to one place to get a great service. The established banks are the best placed to provide this – they have the scale, security and investment power to mimic or acquire the best fintech models and roll them out to the millions.
The banks will find new savings, new margins and new customers as a result.
The but in all this is the internet titans. Amazon, Google and Facebook have the ability to enter and dominate the industry. In the US Google has already started connecting their search and marketing data with consumer credit and debit card spend, and as they continue on their mission to ‘organise the world’s information’ surely financial data must be in their plans somewhere…
For more information on how GK can support your financial services business, contact email@example.com
Read GK’s report into the UK’s evolving consumer credit market here.