In the past few years, UK authorities have reduced the barriers to entry of new entrants looking to launch in the retail banking segment. With the barriers reduced, the UK has seen a slur of new players, most offering digital only solutions but others using a hybrid online and branch model. To further push competition, the UK authorities (the Financial Conduct Authority and Prudential Regulation Authority) have announced they will create a special unit to help new entrants navigate regulation and be well positioned to succeed.
Commenting on the unit, Andrew Bailey, CEO, PRA said,
“The New Bank Start-Up Unit builds on the work we have already done to reduce the barriers to entry for prospective banks, which has led to twelve new banks now authorised since April 2013. These new banks are a key part of bringing innovation to the sector, particularly where there is a gap in the market – whether it is the service they provide, the customers they target, the products they sell or the technology they use. With the launch of the New Bank Start-up Unit, applicants will now benefit from having a single place where they can get the advice and guidance they need to start a new bank and support once they are authorized.”
While UK authorities have made strides to reduce regulation, by creating a special fintech unit, regulators can ensure that new entrants are following rules correctly and could potentially limit any mistakes in the future that could undue consumer trust in the segment. Though established players may see this as a step too far in helping new competition, by preventing any potential failures that could lead to further consumer distrust of the major banks in the UK, it is good for the whole industry.
Overview by Tristan Hugo-Webb, Associate Director, Global Payments Advisory Service at Mercator Advisory Group
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