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CROWDFUNDING


APIs in the UK banking sector via technical protocols for third parties, which are still to be finalised. Other measures in the framework include informed customer consent mechanisms; and constraints on timelimits and transaction size caps – all to be overseen by an independent authority.


The authority will handle any customer complaints and accredit third party solutions as secure and compliant with the API standard. A fully functioning open data market in the UK banking sector is envisaged by the end of March 2019. Worldwide this will be revolutionary, but much work still needs to be done to make it a reality.


It’s an exciting version of the future and chimes in with separate but more limited EU moves to open up the payments sector specifically, using the Payment Services Directive (PSD) 2 rules. This regulation is designed to allow alternative payment service providers (PSPs) to more easily access financial services information and infrastructures in order to compete with traditional banks.


PSD2 is dedicated to opening up the European payments marketplace, as is the broader UK Open Banking Standard. Both stem from the same desire to encourage new players and a more open accessible environment that allows competition and access to newcomers.


Displacement is not inevitable


“HSBC is very open to the FinTech landscape. We are always looking to identify technology firms that can help us, and to partner or take stakes in them to improve our business,” says Christophe Chauzot, Group Head of Innovation, HSBC, who maintains that he is not overly concerned about the displacement or indeed disintermediation threat from technology-led rivals. Rather he views it as an opportunity to learn and improve. “FinTech is like any other area of business with some successes and failures. PayPal is an obvious disruptive success of the past, but how many others have there been?”


Setting up a rival fully functioning bank is not an easy


The establishment can use the same revolutionary technologies to compete with newcomers, however, and potentially transform their old siloed infrastructures. Whether their newer greenfield rivals use crowdfunding to raise capital or some other means is not really the point – excepting any customer engagement and advocacy benefits they may get – which a mutual membership-owned organisation, such as Nationwide, should be able to match anyway.


There is obviously still work to do in deepening digital transformations at established banks so they can enhance automation, knowledge sharing, efficiency, and customer service enterprise-wide. It’s necessary to fight off newcomers, however they are funded.


task, but Metro, Virgin and the entrepreneurial lender Oak North have managed it in the UK alone, so it is possible – although none yet have the scale to upset the established order.


“Disruptive technology is clearly changing the industry, but in my opinion FinTechs and banks have complementary strengths,” said Kevin Hanley, Director of Design Services, RBS, at a recent SAP roundtable event held in the City of London, entitled ‘How Banks Can Survive Digital Disruption’. “We don’t want to be a FinTech firm but we do recognise the importance of technology and of buying and/or competing with them – it’s the way of the world now. Industry boundaries are blurring and banking is becoming unbundled.”


Speaking at the same event, Matt Cox, Head of Innovation and Insight, Nationwide, admitted the long-term implications of the digital transformation that is underway upon business models are still to reveal themselves. “Depending how it goes some institutions may need to specialise. I think if you maintain customer trust and service, however, there won’t be a cataclysm.”


Andy Hirst, Vice President, Banking Solutions at SAP, and moderator of the roundtable, agreed that “banking is changing dramatically” and added he believes “it’s going through another revolution due to Big Data, the rise of mobile, and so on.”


www.ibsintelligence.com © IBS Intelligence 2016


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