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Financial services regulators launch unit to help startup banks

UK finance industry regulators Prudential Regulation Authority and Financial Conduct Authority have dedicated more resources to helping startup banks get up and running

The UK financial services regulators have set up a unit focused on helping the growing number of challenger bank startups get regulatory approval.

The Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) have jointly launched the New Bank Start-up Unit to provide information and support to firms attempting to become banks.

Staff from the PRA and the FCA will be in the unit, which will have a dedicated helpline and email address. It will provide new banks with the information and materials they need to navigate the process to become a new bank, as well as with focused supervisory resource during the early years of authorisation, according to a PRA statement.

Many of the startup firms, or challenger banks as they are often known, are using technology as a key differentiator. But they sometimes lack the experience in the finance sector required to navigate the complex regulatory rules. If they can get approval, there is demand for alternative financial services.

“The New Bank Start-Up Unit builds on the work we have already done to reduce the barriers to entry for prospective banks, which has led to 12 new banks now authorised since April 2013. These new banks are a key part of bringing innovation to the sector, particularly where there is a gap in the market – whether it is the service they provide, the customers they target, the products they sell or the technology they use,” said Andrew Bailey, CEO at the PRA.

Read more about financial services challengers

The unit will provide named case officers for firms during the authorisation process, and a greater level of supervisory support during the early years after a new bank has been authorised.

Tracey McDermott, acting CEO at the FCA, said the New Bank Start-Up Unit will help those who want to start a new bank in the UK navigate the regulatory process.

“Increasing competition in the banking sector is important for consumers and the new unit will offer firms an accessible way to find the information they need to get themselves authorised,” she said.

Meanwhile, Fidor Bank, which launched in the UK in September, has just announced the availability of a Fidor debit MasterCard for all of its UK current account holders. Fidor offers a current account, savings bonds service and Euro money (Sepa) transfer option and uses social media to overcome the cost and complexity of traditional banking. It increases customer trust through an online community.

The findings of an EY study of more than 10,000 digitally active consumers in Australia, Canada, Hong Kong, Singapore, the UK and the US found that about 3,000 had used financial technology (fintech).

The EY report said: “Adoption is relatively high for such a new category – with 15.5% of digitally active consumers using fintech products. The projected growth is dramatic – the adoption levels could potentially double in 12 months.”

Money payments and transfers are the most common use of financial technology, with 17.6% of respondents who used at least one fintech service accessing these. Savings and investments were next, with 16.7% using this type of service. Insurance (7.2%) and borrowing (5.6%) came next.

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