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Delivering competition and
innovation in retail banking
Fintech workshop
21 February 2017
Colin Garland
Director, Remedies, Business and Financial
Analysis
1
Regulatory landscape
2
● CMA: UK competition authority
● HMT: UK government including banking/financial sector policy
● FCA: UK financial sectoral regulator (including supervisory and
concurrent competition powers) with duty to promote competition
● PSR: Duty to promote competition
● BoE/PRA: UK monetary policy and financial stability, with duty to
promote competition
● EC (for now at least)
UK Market Investigation Regime
3
● Enterprise Act 2002
● Whether any feature or combination of features, of each relevant
market, prevents, restricts or distorts competition and thereby has
an adverse effect on competition (AEC)
● What actions should be taken to as comprehensively as possible
remedy, mitigate or prevent the adverse effect on competition or
any detrimental effect on customers
● Retail banking market investigation :
- Personal current accounts
- SME banking: business current accounts and SME lending
Market investigation findings
● Adverse effect on competition
in the provision of
- PCAs
- BCAs
- SME lending
● AECs linked
- Products
- Geographic market
4
● Features:
- Barriers to accessing and
assessing information
- Barriers to switching
- Low levels of customer
engagement
- Incumbency advantages
- Product linkages
- Information asymmetries
Our remedies package
5
Foundation measures
Open Banking standards
Service quality information
Customer prompts
Current account switching measures
PCA overdraft
measures
Additional banking measures for small
businesses
Better governance of guaranteed
switching service
Extended redirection of payments
following switching
Customer access to transactions history
Customer awareness and confidence
Overdraft alerts with grace periods
Monthly maximum charge (MMC)
Improved account opening and switching process
Competition to develop SME comparison
tools
Loan rate transparency
Loan price and eligibility indicator
Standard information requirements for BCA
opening
Sharing of SME information
‘Soft’ searches
Role of professional advisers
Integrated package of remedies to comprehensively address
competition problems
Supplemented with recommendations to FCA, HMT and BEIS
Open APIs
6
Open Banking
• Fingleton/ODI Report
September 2014
• Midata March 2015
• OBWG Report January 2016
CMA Report August 2016
PSD2
January 2018
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CMA REMIT
PSD2
OBWG VISION
CURRENT
ACCOUNTS AND
SME BANKING
SERVICES
ALL PAYMENT
ACCOUNTS
ALL CONSUMER
FINANCIAL
PRODUCTS
Open Banking only one part
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Benefits of Open Banking 1
9
Benefits of Open Banking 2
5
Bank checks
PCW and
sends data
securely to it
PCW uses
transaction data to
calculate which
product is best for
that customer,
including rewards
and charges
Customer
clicks through
to online bank
account and
enters
credentials.
Tells bank to
send
transaction
details to
PCW
2 3
4
Customer visits
comparison site. 1
Customer
switches
account
5
10
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Tools to help ‘squeezed’ and
‘struggling’ consumers
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The CMA required the leading banks in GB and NI to:
(a) set up an entity (the Implementation Entity) that will be tasked with agreeing,
implementing and maintaining open and common banking standards;
(b) appoint a suitably qualified, independent person (the Implementation Trustee), to
act as chair of the Implementation Entity with responsibility for the delivery of the
project’s objectives;
(c) use their best endeavours to achieve the objectives of the project within the timetable
agreed with the CMA;
(d) agree to be bound by the decisions of the Implementation Trustee;
(e) release and make available through an open API by 31 March 2017, and thereafter
maintain as open data, specified reference and product information;
(f) agree with the IT open standards for APIs with full read and write functionality and
make available through them PCA and BCA transaction data sets, to be released no
later than the transposition deadline of the second Payment Services Directive
(PSD2) ie by 13 January 2018.
Implementing Open Banking
Substantial benefits… but key issues
to be addressed
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● Customer trust and confidence
● Customer awareness
● Security
● Clarity of responsibilities: customer, industry, regulators
● Safeguards and redress
● Transition into PSD2 and beyond
Thank you
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