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The government’s Competition and Markets Authority (CMA) has requested feedback on proposals to increase competition in the UK banking sector.
The consultation is part of an investigation into retail banking that began in 2013.
Many of the suggestions are a reaction to the digital revolution in retail banking and are expected to benefit retail banking customers through competition and encourage the finanical technology (fintech) industry to develop services.
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The planned changes include the development of open application programming interfaces (APIs) in banking to give consumers more control over accounts. Through open APIs, third parties and multiple finance firms can use a consumer’s data to recommend the best service, including bank accounts.
There is also a proposal that banks must send customers text messages to warn them when they are close to becoming overdrawn. In August 2016, the CMA said banks will be required to implement the 17 proposals by early 2018.
The CMA is now asking for responses to its plan to be sent by 23 December 2016.
Alasdair Smith, chairman of the retail banking market investigation, said the proposed reforms will transform banking for personal customers and small businesses. “The reforms will break down barriers, increase competition and give customers control over their own money,” he said.
“Taken together, we expect our remedies to deliver direct benefits to customers of between £700m and £1bn,” he added.
Competition will also support the growing fintech sector in the UK, which can develop products and services using the open APIs.
Read more about APIs in banking
- The Competition and Markets Authority (CMA) calls on the largest banks in the UK to develop a set of core open APIs (application programming interfaces).
- Mastercard launches a platform for software developers looking to integrate its payments functionality into their applications.
- Western Union’s head of digital ventures, Khalid Fellahi, discusses how the money transfer service is embracing digitisation.
In February 2015, then city minister Andrea Leadsom said API’s will help the UK’s fintech industry by encouraging more IT firms to develop financial services technology. “Key to our long-term economic plan is making Britain the global centre for fintech and innovation,” she said.
The UK is seen as an important hub, particularly London with its large financial services community. Earlier in 2016, Tech City chair Eileen Burbidge said the UK is well positioned to become a world leader in financial services within five years, due to the size of the technology talent pool in London.
Speaking at a cloud event, Burbidge said the combination of financial and IT expertise makes the UK an ideal location for fintech firms. “Where I think Britain has the ability to shine and genuinely lead the world is in something like financial services,” she said.