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

7

CMA REMIT

PSD2

OBWG VISION

CURRENT

ACCOUNTS AND

SME BANKING

SERVICES

ALL PAYMENT

ACCOUNTS

ALL CONSUMER

FINANCIAL

PRODUCTS

Open Banking only one part

8

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

11

Tools to help ‘squeezed’ and

‘struggling’ consumers

12

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

13

● Customer trust and confidence

● Customer awareness

● Security

● Clarity of responsibilities: customer, industry, regulators

● Safeguards and redress

● Transition into PSD2 and beyond

Thank you

14