The UK Government is bringing in a new regulatory regime for fintech firms which will transform the way people engage with their finances and make it possible to manage all of their finances at the touch of a button. From January next year, they will – at the request of a customer – be able to access data from all of their bank accounts.
This could lead to innovations like managing all bank accounts from one app, enabling people to budget more effectively, or helping consumers avoid unwanted overdrafts by making automatic payments between bank accounts when funds are running low.
New apps could provide personalised product recommendations based on exactly how consumers spend their money, such as suggesting which savings product would suit best based an individual’s saving habits.
“Thanks to the changes we’re making, new FinTech firms can enter the market and offer innovative and transformative banking services that are tailored to meet people’s needs,” said Economic Secretary to the Treasury, Stephen Barclay. “New apps will empower people to take greater control over their finances. Whether that’s through managing all of their bank accounts in one place or helping to avoid unauthorised overdrafts when they have money elsewhere.”
The changes stem from the European Union’s second Payment Services Directive and are expected to drive further innovation in fintech in the UK.
Giving people the ability to know exactly which products are best for them at a touch of a button will also drive competition in the financial services market, said the Government. Consumers will switch to the best product for them, and competition will compel firms to provide better products. More competition will drive further consumer choice, and better and cheaper services, it said.
Stephen Jones, chief executive of trade association UK Finance, said: “We are excited by the potential for these reforms to enhance competition and innovation in the financial services sector – and welcome the publication of these regulations which mark an important milestone on the journey towards implementing it.
“The changes will allow customers to use details of their payments to help plan and manage their money better. What’s more, this is just the start. There are a whole host of benefits for customers, many of which we are just beginning to see.”
Coinciding with his remarks, the Bank of England has published a detailed framework on widening access to Britain’s interbank payments system to increase competition from new fintech firms in the financial system, where the “Big Four” high street banks have long dominated.
It allows new payments firms like those offering prepaid cash cards and prepaid online and mobile accounts, to have access to its “real time gross settlement” or RTGS payments system. Remittance firms, which allow people to send money overseas, and foreign exchange services are also included. “This should support financial stability through greater diversity and risk-reducing payment technologies,” Band of England governor Mark Carney said in a statement.
Currently, non-bank payments services providers use systems such as CHAPS, owned by big banks like HSBC, Barclays, Lloyds and RBS. Reduced dependence on bank competitors for access to payment systems will allow the non-bank providers to offer a wider range of payments services, the Bank of England said.