THE FINANCIAL services sector must be “careful about the hype” when it comes to Open Banking, the City watchdog has warned.
The Financial Conduct Authority (FCA) has said it will take a while for a “winning formula” to emerge but has warned that firms must ensure people aren’t excluded by too much focus on technology.
Speaking at the Future of Retail Banking conference, Christopher Woolard (pictured), executive director of strategy and competition at the FCA, said while much of the focus of Open Banking is on opportunities for alternative lenders, incumbents also have an opportunity.
“We have to be careful about the hype,” Woolard said. “This probably will not be sudden or dramatic. There will be offerings from new players and existing brands alike.
“It is likely to take time for a winning formula to emerge.
“It is certainly true that the opening up of data required by the regulation creates opportunities for new players to come through.
“But incumbents, too, can ride the wave. For innovative thinkers prepared to look beyond their traditional parameters, opportunities abound – especially for trusted brands.”
He suggested some banks could use fintech firms for customer-facing tasks while maintaining their own back office.
“I don’t think it’s a stretch to say that we’ll begin to see new business models emerging,” Woolard said.
“This could include challengers taking on specialist niches – either previously serviced by incumbents, or never serviced before. And that’s an exciting prospect for consumers.
“Some banks have told us we could also start to see a model emerge in which large banks provide the back office infrastructure and challengers, perhaps trusted technology giants, provide the consumer interface.
“That in turn could change the face of our high streets as firms extend branch closure programmes to free up money for technology, big data and upgrades to their IT systems.”
Woolard said incumbent banks have advantages as they are more familiar with existing regulations compared with new entrants, but he warned there are some risks.
“While for some consumers the shift in technology will be welcome, for others, such as those less likely to have internet access, the decline of physical branches creates an almost insurmountable hurdle between them and their finances,” he added.
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