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by GK Strategy 12th October, 2017
3 min read

Finally a regulator shaking it up rather than stifling business

Regulators are typically seen as stifling rather than promoting competition in business – the recent revocation of Uber’s licence in London has done little to help regulators’ cause.

But one of the rare success stories of a regulator identifying a problem, consulting widely on it and not being afraid to defend its actions in the face of strong opposition from established players is open banking. It’s time to celebrate the work of the Competition and Markets Authority (CMA) in this area and champion their role as not just a regulator, but a problem solver. Their drive to enact change using the widest possible group of stakeholders and blow the banking sector wide open has been a refreshing example of true collobation between industry, government and regulator.

Most notably, the pace to shake up competition in this sector has been quite astonishing. From its original report in 2016, the CMA found that older and larger banks, which still account for the large majority of the retail banking market, were not working hard enough to win and retain customers and that it was nigh on impossible for new and smaller providers to attract customers.

The consequences of this report brought together industry experts from the banking, fintech, consumer and business communities, and developed the first open banking standard framework, designed to guide how open banking data should be created and used.

The CMA and the various working groups recommended the delivery of Open Banking, which would enable customers to share – with their express consent – their own bank data securely with third parties. And so, from January next year, nine of the biggest UK banks must provide an online platform that allows other finance providers to access an account holder’s transaction data, if the individual gives their permission. It’s a massive development for the finance sector and one that many accept is overdue.

Its impact will be felt in several ways. The unlocking of this data, previously hoarded by big banks, will force incumbent players to move away from their ‘one size fits all’ product offering; and shift the market to a tailored, customer-centric model with bespoke products. Established banks will have to begin competing with digital and innovative players who could now tempt customers away with better and more personalised banking offers. Research by PwC suggests that banks could lose up to 24% of their business, the boldness and impact of this decision is not to be underestimated.

In short, Open Banking aims to create more competition in the financial market, thus ending the age-old problem of customers paying high prices for low-quality services.

For the consumer, the new financial data freedoms are unlikely to create much of a buzz, as people now routinely expect choice and competition in every facet of life. Yet even with the boon of access to this new data, companies wishing to capitalise on it should keep in mind that data on what consumers actually want is thin on the ground.

Access to this data on banking and spending habits is a game changer, but what to do with it, based on consumer needs, is the challenge and firms wishing to win business from established banks should spend valuable time researching online sentiment and social analytics to develop their new offerings.

Get in touch with Johnny@gkstrategy.com to find out how we can help you navigate a regulatory landscape.

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